UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~

2019

☐

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-20008

ASURE SOFTWARE, INC.

(Exact Name of Registrant as Specified in its Charter)

~~Delaware~~		~~74-2415696~~

Delaware	74-2415696
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

3700 N. Capital of Texas Hwy #350
Austin, Texas	78746
(Address of Principal Executive Offices)	(Zip Code)

(512) 437-2700

(Registrant’s Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐	¨	Accelerated filer ☒	ý	Non-accelerated filer ☐	¨	Smaller reporting company ☐	ý
Emerging growth company ☐	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2~~¨

Securities registered pursuant to Section 12(b) of the ~~Exchange Act). Yes ☐ No ☒~~

Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ASUR	Nasdaq Capital Market

As of ~~November 7, 2018,~~August 8, 2019, the registrant had outstanding ~~15,224,384~~15,551,460 shares of its Common ~~Stock, $0.01 par value.~~

Stock.

~~Table of Contents~~

TABLE OF CONTENTS

			~~Page~~
		~~Number~~
		Page
		Number
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~ 2018	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017~~ 2018	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2019 and June 30, 2018	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017~~ 2018	5 7
	Notes to Condensed Consolidated Financial Statements	6 8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22 17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27 23
Item 4.	Controls and Procedures	27 23

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	28 24
Item 1A.	Risk Factors	28 24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28 24
Item 3.	Defaults upon Senior Securities	28 24
Item 5.6.	~~Other Information~~Exhibits	28 25
~~Item 6.~~	~~Exhibits~~	29
Signatures
~~Signatures~~26		30

~~Table of Contents~~

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

September 30, 2018
(unaudited)

December 31, 2017

Assets

Current assets:

Cash and cash equivalents
$ 19,194 $ 27,792
Accounts receivable, net of allowance for doubtful accounts of $706 and $425
at September 30, 2018 and December 31, 2017, respectively
18,824 13,361
Inventory
1,265 509
Prepaid expenses and other current assets
4,518 2,588
Total current assets before funds held for clients
43,801 44,250
Funds held for clients
71,176 42,328
Total current assets
114,977 86,578
Property and equipment, net
7,830 5,217
Goodwill
107,557 77,348
Intangible assets, net
75,823 33,554
Other assets
3,453 614
Total assets
$ 309,640 $ 203,311
Liabilities and stockholders’ equity

Current liabilities:

Current portion of notes payable
$ 4,502 $ 8,895
Accounts payable
4,025 1,912
Accrued compensation and benefits
2,551 2,477
Other accrued liabilities
2,246 862
Deferred revenue
12,110 13,078
Total current liabilities before client fund obligations
25,434 27,224
Client fund obligations
71,699 42,328
Total current liabilities
97,133 69,552
Long-term liabilities:

Deferred revenue
998 1,125
Deferred tax liability
2,198 1,070
Notes payable, net of current portion and debt issuance cost
108,566 66,973
Other liabilities
953 817
Total long-term liabilities
112,715 69,985
Total liabilities
209,848 139,537
Commitments

Stockholders’ equity:

Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding
- -
Common stock, $.01 par value; 22,000 shares authorized; 15,609 and 12,876 shares issued, 15,224 and 12,492 shares outstanding at September 30, 2018 and December 31, 2017, respectively
156 129
Treasury stock at cost, 384 shares at September 30, 2018 and December 31, 2017
(5,017
)
(5,017
)
Additional paid-in capital
390,834 346,322
Accumulated deficit
(285,372
)
(277,597
)
Accumulated other comprehensive loss
(809
)
(63
)
Total stockholders’ equity
99,792 63,774
Total liabilities and stockholders’ equity
$ 309,640 $ 203,311



	June 30, 2019 (unaudited)			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	14,656		$	15,444
Accounts receivable, net of allowance for doubtful accounts of $1,116 and $1,467 at June 30, 2019 and December 31, 2018, respectively	15,597			16,028
Inventory	5,164			3,117
Prepaid expenses and other current assets	3,022			3,120
Total current assets before funds held for clients	38,439			37,709
Funds held for clients	104,628			122,206
Total current assets	143,067			159,915
Property and equipment, net	10,365			8,948
Goodwill	116,031			111,387
Intangible assets, net	75,526			76,760
Other assets, net	11,984			4,090
Total assets	$	356,973		$	361,100
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable, net of debt issuance cost	$	3,826		$	4,733
Revolving line of credit	4,000			—
Accounts payable	5,821			3,662
Accrued compensation and benefits	2,823			2,824
Other accrued liabilities	4,326			2,234
Deferred revenue	11,686			11,849
Total current liabilities before client fund obligations	32,482			25,302
Client fund obligations	105,296			123,170
Total current liabilities	137,778			148,472
Long-term liabilities:
Deferred revenue	777			876
Deferred tax liability	2,187			1,566
Notes payable, net of current portion and debt issuance cost	112,842			107,229
Other liabilities	6,472			439
Total long-term liabilities	122,278			110,110
Total liabilities	260,056			258,582
Commitments
Stockholders’ equity:
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding	—			—
Common stock, $.01 par value; 22,000 and 22,000 shares authorized; 15,935 and 15,666 shares issued, 15,551 and 15,282 shares outstanding at June 30, 2019 and December 31, 2018, respectively	159			157
Treasury stock at cost, 384 shares at June 30, 2019 and December 31, 2018	(5,017		)	(5,017		)
Additional paid-in capital	394,205			391,927
Accumulated deficit	(291,504		)	(283,643		)
Accumulated other comprehensive loss	(926		)	(906		)
Total stockholders’ equity	96,917			102,518
Total liabilities and stockholders’ equity	$	356,973		$	361,100

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share data)

(Unaudited)

FOR THE
THREE MONTHS ENDED
September 30,

FOR THE
NINE MONTHS ENDED
September 30,

2018

2017

2018

2017

Revenue:

Cloud
$ 18,390 $ 11,062 $ 51,149 $ 27,724
Hardware
1,457 1,003 3,612 3,651
Maintenance and support
1,264 1,777 3,985 4,325
Professional services
2,347 1,685 5,783 3,434
Total revenue
23,458 15,527 64,529 39,134

Cost of sales
8,471 3,396 21,248 8,660
Gross profit
14,987 12,131 43,281 30,474

Operating expenses

Selling, general and administrative
11,052 9,459 33,394 25,286
Research and development
3,514 883 6,495 2,488
Amortization of intangible assets
2,447 1,341 6,038 3,230
Total operating expenses
17,013 11,683 45,927 31,004

Income (Loss) from operations
(2,026
)
448 (2,646
)
(530
)

Other income (loss)

Interest expense, net
(2,350
)
(1,644
)
(6,832
)
(3,279
)
Other income
489 - 489 -
Total other loss, net
(1,861
)
(1,644
)
(6,343
)
(3,279
)

Income (loss) from operations before income taxes
(3,887
)
(1,196
)
(8,989
)
(3,809
)
Income tax provision
303 (85
)
(288
)
(368
)
Net income (loss)
$ (3,584
)
$ (1,281
)
$ (9,277
)
$ (4,177
)
Other comprehensive income (loss)

Foreign currency gain (loss)
(211
)
(6
)
(645
)
(63
)
Unrealized net losses (101 ) - (101 ) -
Comprehensive income (loss)
$ (3,896
)
(1,287
)
$ (10,023
)
$ (4,240
)

Basic and diluted net income (loss) per share

Basic
$ (0.24
)
$ (0.10
)
$ (0.68
)
$ (0.40
)
Diluted
$ (0.24
)
$ (0.10
)
$ (0.68
)
$ (0.40
)
Weighted average basic and diluted shares

Basic
15,223,000 12,418,000 13,591,000 10,355,000
Diluted
15,223,000 12,418,000 13,591,000 10,355,000



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Recurring	$	20,433		$	17,749		$	43,994		35,234
Professional services, hardware and other	4,408			4,018			7,607			5,837
Total revenue	24,841			21,767			51,601			41,071
Cost of Sales	9,851			7,220			18,549			12,777
Gross profit	14,990			14,547			33,052			28,294
Operating expenses:
Selling, general and administrative	11,859			11,633			24,624			22,342
Research and development	1,878			1,558			4,229			2,981
Amortization of intangible assets	2,761			1,994			5,543			3,591
Total operating expenses	16,498			15,185			34,396			28,914
Loss from operations	(1,508		)	(638		)	(1,344		)	(620		)
Other income (expense)
Interest expense and other	(3,091		)	(2,722		)	(5,845		)	(4,482		)
Total other expense, net	(3,091		)	(2,722		)	(5,845		)	(4,482		)
Loss before income taxes	(4,599		)	(3,360		)	(7,189		)	(5,102		)
Income tax expense	(368		)	(408		)	(672		)	(591		)
Net loss	(4,967		)	$	(3,768	)	$	(7,861	)	(5,693		)
Other comprehensive income:
Unrealized gain on marketable securities	78			—			26			—
Foreign currency translation loss	(365		)	(437		)	(46		)	(434		)
Comprehensive loss	$	(5,254	)	$	(4,205	)	$	(7,881	)	$	(6,127	)
Basic and diluted net loss per share
Basic	$	(0.32	)	$	(0.29	)	$	(0.51	)	$	(0.45	)
Diluted	$	(0.32	)	$	(0.29	)	$	(0.51	)	$	(0.45	)
Weighted average basic and diluted shares
Basic	15,444,000			12,939,000			15,425,000			12,762,000
Diluted	15,444,000			12,939,000			15,425,000			12,762,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
$ (9,277
)
$ (4,177
)
Adjustments to reconcile net loss to net cash provided by (used in) operations:

Depreciation and amortization
9,599 4,344
Provision for doubtful accounts
496 320
Share-based compensation
887 363
Release of contingent consideration
(489
)
-
Changes in operating assets and liabilities:

Accounts receivable
(6,587
)
(4,450
)
Inventory
(137
)
(287
)
Prepaid expenses and other assets
(2,250
)
(471
)
Accounts payable
850 (569
)
Accrued expenses and other long-term obligations
678 881
Deferred revenue
168 1,963
         Net cash used in operating activities
(6,062
)
(2,083
)

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions net of cash acquired
(66,366
)
(45,472
)
Purchases of property and equipment
(1,503
)
(942
)
Software capitalization costs
(2,536
)
(804
)
Net change in funds held for clients
16,617 8,867
         Net cash used in investing activities
(53,788
)
(38,351
)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable
36,750 45,777
Payments on notes payable
(5,772
)
(8,098
)
Proceeds from revolving line of credit
4,540 -
Payments on revolving line of credit
(4,540
)
-
Net proceeds from issuance of common stock
39,156 27,820
Debt issuance cost (1,693
)
(1,433
)
Payments on capital leases
(124
)
(131
)
Net change in client fund obligations
(16,937
)
(8,812
)
        Net cash provided by financing activities
51,380 55,123

Effect of foreign exchange rates
(128
)
8

Net (decrease) increase in cash and cash equivalents
(8,598
)
14,697
Cash and cash equivalents at beginning of period
27,792 12,767
Cash and cash equivalents at end of period
$ 19,194 $ 27,464

SUPPLEMENTAL INFORMATION:

Cash paid for:

Interest
$ 5,605 $ 2.180
Income taxes
101 23
Non-cash Investing and Financing Activities:

Subordinated notes payable –acquisitions
7,592 8,165
Equity issued in connection with acquisitions
$ 4,493 21,825



	Common Stock Outstanding	Common Stock Amount		Treasury Stock			Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance at December 31, 2017	12,492	$	129	$	(5,017	)	$	346,322	$	(277,597	)	$	(63	)	$	63,774
Stock issued upon acquisition, net of offering costs	92	1		—			1,124		—			—			1,125
Share based compensation	—	—		—			194		—			—			194
Retrospective adoption of Topic 606	—	—		—			—		1,502			—			1,502
Net loss	—	—		—			—		(1,925		)	—			(1,925		)
Other comprehensive income	—	—		—			—		—			3			3
Balance at March 31, 2018	12,584	$	130	$	(5,017	)	$	347,640	$	(278,020	)	$	(60	)	$	64,673
Stock issued, net of issuance costs	2,390	24		—			39,126		—			—			39,150
Stock issued upon option exercise	24	—					139								139
Share based compensation	—	—		—			329		—			—			329
Net loss	—	—		—			—		(3,768		)	—			(3,768		)
Other comprehensive loss	—	—		—			—		—			(437		)	(437		)
Balance at June 30, 2018	14,998	$	154	$	(5,017	)	$	387,234	$	(281,788	)	$	(497	)	$	100,086

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)



	Common Stock Outstanding	Common Stock Amount		Treasury Stock			Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance at December 31, 2018	15,282	$	157	$	(5,017	)	$	391,927	$	(283,643	)	$	(906	)	$	102,518
Stock issued upon acquisition	123	1		—			554		—			—			555
Share based compensation	—	—		—			611		—			—			611
Net loss	—	—		—			—		(2,894		)	—			(2,894		)
Other comprehensive income	—	—		—			—		—			267			267
Balance at March 31, 2019	15,405	$	158	$	(5,017	)	$	393,092	$	(286,537	)	$	(639	)	$	101,057
Stock issued, ESPP	53	—		—			255		—			—			255
Stock issued upon option exercise and vesting of restricted stock units	93	1		—			466		—			—			467
Share based compensation	—	—		—			392		—			—			392
Net loss	—	—		—			—		(4,967		)	—			(4,967		)
Other comprehensive loss	—	—		—			—		—			(287		)	(287		)
Balance at June 30, 2019	15,551	$	159	$	(5,017	)	$	394,205	$	(291,504	)	$	(926	)	$	96,917

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

ASURE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)(Unaudited)



	For the Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(7,861	)	$	(5,693	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization	7,935			4,964
Amortization of debt financing costs and discount	800			315
Provision for (recovery of) doubtful accounts	(350		)	474
Provision for deferred income taxes	621			1,211
Share-based compensation	1,003			523
Loss on disposals of fixed assets	3			—
Changes in operating assets and liabilities:
Accounts receivable	1,812			(2,576		)
Inventory	(2,082		)	(745		)
Prepaid expenses and other assets	678			(52		)
Accounts payable	1,259			(280		)
Accrued expenses and other long-term obligations	(720		)	(1,843		)
Deferred revenue	(256		)	(1,294		)
Net cash provided by (used in) operating activities	2,842			(4,996		)
Cash flows from investing activities:
Acquisitions net of cash acquired	(7,443		)	(44,167		)
Purchases of property and equipment	(993		)	(738		)
Software capitalization costs	(2,111		)	(1,563		)
Net change in funds held for clients	31,943			18,497
Net cash provided by (used in) investing activities	21,396			(27,971		)
Cash flows from financing activities:
Proceeds from notes payable	8,000			36,750
Payments on notes payable	(4,356		)	(5,388		)
Proceeds from revolving line of credit	4,000			4,540
Payments on revolving line of credit	—			(2,379		)
Debt financing fees	(1,102		)	(1,661		)
Payments on capital leases	(68		)	(68		)
Proceeds from issuance of common stock	722			39,220
Net change in client fund obligations	(32,238		)	(18,497		)
Net cash provided by (used in) financing activities	(25,042		)	52,517
Effect of foreign exchange rates	16			(497		)
Net increase (decrease) in cash and cash equivalents	(788		)	19,053
Cash and cash equivalents at beginning of period	15,444			27,792
Cash and cash equivalents at end of period	$	14,656		$	46,845
Supplemental information:
Cash paid for:
Interest	$	4,804		$	3,525
Income taxes	31			26
Non-cash Investing and Financing Activities:
Subordinated notes payable –acquisitions	$	2,000		$	5,812
Equity issued in connection with acquisitions	555			1,200

The accompanying notes are an integral part of these condensed consolidated financial statements.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

Asure Software, Inc., (“Asure”, the “Company”, “we” and “our”), a Delaware Corporation, is a leading provider of Human Capital Management (“HCM”) and ~~Workplace~~Workspace Management, offering intuitive and innovative cloud-based solutions designed to help organizations of all sizes and complexities build companies of the future. Our cloud ~~platforms~~platform enables clients worldwide to better manage their people and space in a mobile, digital, multi-generational, and global landscape. Asure’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, Human Resources (“HR”) consulting, and time and labor management as well as a full suite of workspace management solutions for conference room scheduling, desk sharing programs, and real estate optimization. We develop, market, sell and support our offerings worldwide through our principal office in Austin, Texas and through additional offices in Alabama, California, Florida, Massachusetts, Michigan, Nebraska, New York, North Carolina, Oregon, Tennessee, Vermont, Washington, and the United Kingdom. ~~As a result of the 2018 acquisitions, we also have operations in California, Iowa, Tennessee, North Carolina, Georgia and New York.~~

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission and accordingly, they do not include all information and footnotes required under U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. Certain reclassifications were made to conform to the current period presentation in the condensed consolidated ~~balance sheets.~~statements of comprehensive loss. These reclassifications include a ~~reclassification to~~change in the ~~long-term deferred tax liability.~~

presentation of revenues.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of ~~September~~June 30, ~~2018,~~2019, the results of operations and statements of changes in stockholders' equity for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and June 30, 2018, and ~~September 30, 2017, and~~ our statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017.~~

2018.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in our annual report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. The results for the interim periods are not necessarily indicative of results for a full fiscal year.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

~~CASH AND CASH EQUIVALENTS~~

~~Cash and cash equivalents include cash deposits and highly liquid investments with an original maturity~~

USE OF ESTIMATES

Preparation of ~~three months or less when purchased.~~

~~INVESTMENTS AVAILABLE-FOR SALE~~

~~Available-for-sale securities are carried at fair value, with~~ the unrealized gains and losses reported in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretion of discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

~~LIQUIDITY~~

In April 2018, we filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) to provide access to additional capital, if needed. Pursuant to the shelf registration statement, we may from time to time offer to sell in one or more offerings shares of our common stock or other securities having an aggregate value of up to $175,000 (which includes approximately $60,000 of unsold securities that were previously registered on our currently effective registration statements). The shelf registration statement relating to these securities became effective on April 16, 2018. As of September 30, 2018, there is $133,438 remaining available under the shelf registration statement.

In June 2018, we completed an underwritten public offering in which we sold an aggregate of 2,375,000 shares of our common stock at a public offering price of $17.50 per share. We realized net proceeds of approximately $38,910 after deducting underwriting discounts and estimated offering expenses.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

As of September 30, 2018, our principal sources of liquidity consisted of $19,194 of cash and cash equivalents, cash we expect to generate in the future from our business operations, $5,000 available for borrowing under our revolving line of credit, and $25,000 delayed draw term loan commitment with Wells Fargo Bank, National Association (“Wells Fargo”) discussed in Note 6 – Notes Payable. We believe that we have and/or will generate sufficient cash for our short- and long-term needs, including meeting the requirements of our term loan, and the related debt covenant requirements. We continue to seek reductions in our expenses as a percentage of revenue on an annual basis and thus may utilize our cash balances in the short-term to reduce long-term costs. We believe that we have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months from the issuance of these condensed consolidated financial ~~statements. However, we may need~~statements in conformity with U.S. GAAP requires management to ~~raise additional capital or incur additional indebtedness to grow our existing software operations~~make estimates and ~~to seek additional strategic acquisitions in~~assumptions that affect the ~~near future.~~

Management is focused on growing our existing product offering, as well as our customer base, to increase our recurring revenue. We have made and will continue to explore additional strategic acquisitions. We expect to fund any future acquisitions with equity, available cash, cash we expect to generate in the future from our business operations, funds under our credit facilities, and cash generated from the issuance of equity or debt securities.

~~In our evaluation~~reported amounts of the ~~Company’s ability to continue as a going concern in accordance with ASU 2014-15, we have considered factors such as~~assets and liabilities, the ~~Company’s historical~~disclosure of contingent assets and ~~forecasted results~~liabilities at the date of ~~operations and cash flows from operations.The Company recorded $9,277 of net loss and $6,062 of cash outflows from operations during~~ the nine months ended September 30, 2018, which are indicators of substantial doubt regarding the Company’s ability to continue as a going concern.. We believe that we have sufficient capital and liquidity to fund and cultivate the growth of our current and future operations for at least the next twelve months from the issuance of these condensed consolidated financial statements and ~~to maintain compliance with~~ the ~~terms~~reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year end and the reported amounts of revenues and expenses during the reporting period. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions. We base our ~~debt agreements~~estimates on historical experience and ~~related covenants or to obtain compliance through debt repayments made with~~on various other assumptions management believes reasonable under the ~~available cash on hand or anticipated for receipt~~given circumstances. These estimates could be materially different under different conditions and assumptions. Additionally, the actual amounts could differ from the estimates made. Management periodically evaluates estimates used in the ~~ordinary course~~preparation of ~~operations, which will mitigate~~the consolidated financial statements for continued reasonableness. We make appropriate adjustments, if any, to the estimates used prospectively based upon such ~~substantial doubt regarding the Company’s ability to continue as a going concern.~~

periodic evaluation.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Standards

~~Effective January 1, 2018, we adopted~~

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~~~, and ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date,~~ ~~which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 (“Topic 606”) “Revenue from Contracts with Customers) supersedes the revenue recognition requirements in ASC 605,~~ ~~Revenue Recognition,~~ and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of ASU 2014-09, using the modified retrospective approach, had no significant impact on our results of operations, cash flows, or financial position. The initial application was applied to all contracts at the date of initial application. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. Results of reporting periods after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded a $1,502 cumulative effect adjustment to opening retained earnings as of January 1, 2018 related to an increase in deferred commissions. There was no impact to revenue as a result of applying Topic 606.

The primary impact of adopting Topic 606 is to sales commissions related to onboarding new clients that were previously expensed. Under the new standard, these costs are now capitalized as deferred commissions and amortized over the estimated customer life of five to ten years.

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

~~The impact from the adoption of Topic 606 to our consolidated balance sheet and income statement as of and for the three and nine months ended September 30, 2018, are as follows:~~

September 30, 2018

Balance Using Previous
Standard

Increase
(Decrease)

Balance Sheet

Assets

Prepaid expenses and other current assets
$ 4,518 $ 4,356 $ (162 )
Total current assets before funds held for clients
43,801 43,639 (162 )
Total current assets
114,977 114,815 (162 )
Other assets
3,453 713 2,740
Total assets
$ 309,640 $ 306,738 $ 2,578

Liabilities and stockholders’ equity

Accumulated deficit
(285,372
)
(282,470
)
2,578
Total stockholders’ equity
99,792 96,890 2,578
Total liabilities and stockholders’ equity
$ 309,640 $ 306,738 $ 2,578

For the Three Months Ended
September 30, 2018

Balance Using Previous
Standard

Increase
(Decrease)

Income Statement

Operating expenses

Selling, general and administrative
11,052 10,738 (314 )
Total operating expenses
17,013 16,699 (314
)
Gain (Loss) from operations
(2,026
)
(1,712
)
(314
)
Loss from operations before income tax
(3,887
)
(3,573
)
(314
)
Net Loss
$ (3,584
)
$ (3,270
)
$ 314
Other comprehensive loss
$ (3,896
)
$ (3,582
)
$ 314

For the Nine Months Ended
September 30, 2018

Balance Using Previous
Standard

Increase
(Decrease)

Income Statement

Operating expenses

Selling, general and administrative
33,394 32,519 (875
)
Total operating expenses
45,927 45,052 (875
)
Gain (Loss) from operations
(2,646
)
1,771 (875
)
Loss from operations before income tax
(8,989
)
(8,114
)
(875
)
Net Loss
$ (9,277
)
$ (8,402
)
$ (875
)
Other comprehensive loss
$ (10,023
)
$ (9,148
)
$ (875
)

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” which eliminates the diversity in practice related to eight cash flow classification issues. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

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~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires the change in restricted cash or cash equivalents to be included with other changes in cash and cash equivalents in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this accounting standard did not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

~~Standards Yet To Be Adopted~~

~~In February 2016, the FASB issued ASU~~ No. 2016-02, “Leases (Topic 842)”. The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use ("ROU") asset representing its right to use the underlying asset for the lease term. We will be required to adopt the new standard in the first quarter of 2019. While we are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements, we expect the adoption will result in a material increase in the assets and liabilities recorded on our Condensed Consolidated Balance Sheets and additionalAdditional qualitative and quantitative ~~disclosures.~~

disclosures are also required. We adopted the standard on January 1, 2019, utilizing the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. Upon adoption, we did not record an adjustment to our beginning accumulated deficit.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

In addition, we adopted the following additional practical expedients available for implementation:

•An entity need not reassess whether any existing or expired contracts are or contain leases;

•An entity need not reassess lease classification for any existing or expired leases; and

•An entity need not reassess initial direct costs for any existing leases.

We recognized lease liabilities of approximately $8,900 on January 1, 2019. A right-of-use asset of approximately $8,200 was recognized based on the lease liability, adjusted for the reclassification of deferred rent and lease incentive of approximately $680. The standard did not materially impact our operating results or liquidity upon adoption. The standard has no impact on the timing or classification of our cash flows as reported in the Condensed Consolidated Statement of Cash Flows. Our accounting for finance leases remained substantially unchanged. Disclosures related to this standard are included in Note 7, Leases.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which provides entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the 2017 Tax Cuts and Jobs Act (“the Tax Act”) to retained earnings. ~~The guidance is~~We adopted the standard effective ~~for fiscal years beginning after December 15, 2018, with early adoption permitted. We do not expect the~~January 1, 2019. The adoption of this accounting standard todid not have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

~~REVENUE RECOGNITION~~

~~On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied~~

Standards Yet To Be Adopted

The FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those ~~contracts which were not completed as of January 1, 2018. Results of reporting periods~~fiscal years, beginning after ~~January 1, 2018~~December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. We plan to adopt this standard at the effective date and do not expect any material impact from adoption.

The FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). The new guidance reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). For public companies, the amendments in this ASU are ~~presented under Topic 606, while prior period amounts~~effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations or cash flows are not ~~adjusted and continue~~expected to be ~~reported in accordance with~~material.

LEASES

At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As our ~~historic accounting under Topic 605. There was no impact to revenue as a result of applying Topic 606 for the three and nine months ended September 30, 2018.~~

~~Our revenue consist of software-as-a-service (“SaaS”) offerings and time-based software subscription license arrangements that also,~~leases typically ~~include hardware, maintenance/support, and professional services elements. We recognize revenue on~~do not provide an ~~output basis when control of the promised goods or services is transferred to~~implicit rate, we use our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We determine standalone selling pricesincremental borrowing rate based on the ~~amount~~information available at the commencement date taking into consideration necessary adjustments for collateral, depending on the facts and circumstances of the lessee and the leased asset, and term to match the lease term. The ROU asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded in other current liabilities and other non-current liabilities. ROU assets are recorded in other assets, net.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we believe the market is willing to pay determined through historical analysis of sales data as well as through use of the residual approach when we can estimate the standalone selling price for one or more, but not all, of the promised goods or services.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

SaaS arrangements and time-based software subscriptions typically have an initial term ranging from one to three years and are renewable on an annual basis. A typical SaaS/software subscription arrangement will ~~also include hardware, setup and implementation services. Revenue allocated to the SaaS/software subscription performance obligations~~exercise that option. Operating lease costs are recognized on ~~an output~~a straight-line basis ~~ratably as the service is provided~~ over the ~~non-cancellable term of the SaaS/subscription service~~lease term. Lease agreements that contain both lease and non-lease components are reported as Cloud revenue on the Consolidated Statement of Comprehensive Loss. Revenue allocated to other performance obligations included in the arrangement is recognized as outlined in the paragraphs below.

Hardware devices sold to customers (typically time clocks, LCD panels, sensors and other peripheral devices) are sold as either a standard product sell arrangement where title to the hardware passes to the customer or under a hardware-as-a-service (“HaaS”) arrangement where the title to the hardware remains with Asure. Revenue allocated to hardware sold as a standard product are recognized on an output basis when title passes to the customer, typically the date we ship the hardware. Revenue allocated to hardware under a hardware-as-a-service (“HaaS”) arrangement are recognized on an output basis, recorded ratably as the service is provided over the non-cancellable term of the HaaS arrangement, typically one year. Revenue recognized from hardware devices sold to customers via either of the two above types of arrangements are reported as Hardware revenue on the Consolidated Statement of Comprehensive Loss.

Our professional services offerings typically include data migration, set up, training, and implementation services. Set up and implementation services typically occur at the start of the software arrangement while certain other professional services, depending on the nature of the services and customer requirements, may occur several months later. We can reasonably estimate professional services performedgenerally accounted for a fixed fee and we recognize allocated revenue on an output basis on a proportional performance basis as the service is provided. We recognize allocated revenue on an output basis for professional services engagements billed on a time and materials basis as the service is provided. We recognize allocated revenue on an output basis on all other professional services engagements upon the earlier of the completion of the service’s deliverable or the expiration of the customer’s right to receive the service. Revenue recognized from professional services offerings are reported as Professional service revenue on the Consolidated Statement of Comprehensive Loss.

We recognize allocated revenue for maintenance/support on an output basis ratably over the non-cancellable term of the support agreement. Initial maintenance/support terms are typically one to three years and are renewable on an annual basis. Revenue recognized from maintenance/support are reported as Maintenance and support revenue on the Consolidated Statement of Comprehensive Loss.

We do not recognize revenue for agreements with rights of return, refundable fees, cancellation rights or substantive acceptance clauses until these return, refund or cancellation rights have expired or acceptance has occurred. Our arrangements with resellers do not allow for any rights of return.

Our payment terms vary by the type of customer and the customer’s payment history and the products or services offered. The term between invoicing and when payment is due is not significant and as such our contracts do not include a significant financing component. The transaction prices of our contracts do not include consideration amounts that are variable and do not include noncash consideration.

Deferred revenue includes amounts invoiced to customers in excess of revenue we recognize, and is comprised of deferred Cloud, HaaS, Maintenance and support, and Professional services revenue. We recognize deferred revenue when we complete the service and over the terms of the arrangements, primarily ranging from one to three years.

separately.

CONTINGENCIES

Although we have been, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of ~~September~~June 30, ~~2018,~~2019, we were not party to any pending legal proceedings.

ASURE SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

NOTE 3 – INVESTMENTS AND FAIR VALUE MEASUREMENTS

~~During the three months ended September~~

As of June 30, 2019 and December 31, 2018, ~~$4,217~~$4,556 and $4,256, respectively, of ~~Funds Held~~funds held for ~~Clients~~clients were invested in short-term available-for-sale securities consisting of government and commercial bonds, including mortgage backed securities. ~~There were no investments in securities during the first six months~~As of ~~2018~~June 30, 2019 and ~~the three and nine months ended September 30, 2017. At September 30,~~December 31, 2018, we also had ~~$10,000~~$31,616 and $0, respectively, of funds held for clients invested in money market funds. Additionally, at June 30, 2019 and December 31, 2018, we had $10,973 and $8,111, respectively, in money market funds, classified as cash equivalents.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

Investments classified as short-term available-for-sale ~~as of September 30, 2018~~ consisted of the following:

As of September 30, 2018

Amortized
Cost

Gross
Unrealized
Gains  ⁽¹⁾

Gross
Unrealized
Losses  ⁽¹⁾

Aggregate
Estimated
Fair Value

Corporate debt securities  ⁽²⁾
$ 4,318 $ 14 $ (115
)
$ 4,217



	Amortized Cost		Gross Unrealized Gains ⁽¹⁾		Gross Unrealized Losses ⁽¹⁾			Aggregate Estimated Fair Value
June 30, 2019:
Corporate debt securities -Funds Held for Clients ⁽²⁾	$	4,530	$	52	$	(26	)	$	4,556
December 31, 2018:
Corporate debt securities -Funds Held for Clients ⁽²⁾	$	4,334	$	21	$	(99	)	$	4,256

~~(1)~~

(1)

Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss. At ~~September~~June 30, 2019 and December 31, 2018, there were 2734 and 26 securities, respectively, in an unrealized gain position and there were 29 and 32 securities, respectively, in an unrealized loss position. ~~These~~As of June 30, 2019 and December 31, 2018, these unrealized losses were less than ~~$25,000~~$30 individually and ~~$115,000~~$170 in the aggregate. These securities have not been in a continuous unrealized gain or loss position for more than 12 months. ~~The Company does~~We do not intend to sell these investments and ~~it is~~we do not ~~more likely than not that the Company will be required~~expect to sell these investments before recovery of their amortized cost basis, which may be at maturity. ~~The Company reviews its~~We review our investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and ~~the Company’s~~our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

~~(2)~~
(2)	At ~~September~~June 30, 2019 and December 31, 2018, none of these securities were classified as cash and cash equivalents on the ~~Company’s~~accompanying condensed consolidated balance ~~sheet and none of these securities were scheduled to mature outside of one year.~~ sheet.

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which is based on the reliability of the inputs used in measuring fair values. These tiers include:


Level 1:	Quoted prices in active markets for identical assets or liabilities;


Level 2:	Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similar assets or liabilities; and model-driven valuations whose significant inputs are observable; and


Level 3:	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

At September 30, 2018, we had $10,000 in money market funds, classified as cash equivalents. Short-term available-for-sale securities consist of government and commercial bonds, including mortgage backed securities, and are classified as Funds Held for Clients on the accompanying condensed consolidated balance sheet.

~~Table of Contents~~

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

The following table presents the fair value hierarchy for our financial assets measured at fair value on a recurring basis as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively:

Fair Value Measure at September 30, 2018

Total

Quoted

Significant

Carrying

Prices

Other

Significant

Value at

in Active

Observable

Unobservable

September 30,

Market

Inputs

Inputs

Description

2018

(Level 1)

(Level 2)

(Level 3)

Assets:

Cash and cash equivalents
$ 19,194 $ 19,194 $ - $ -
Short-term available-for-sale securities- Funds Held for Clients
4,217 - 4,217 -
Total
$ 23,411 $ 19,194 $ 4,217 $ -

Fair Value Measure at December 31, 2017

Total

Quoted

Significant

Carrying

Prices

Other

Significant

Value at

in Active

Observable

Unobservable

December 31,

Market

Inputs

Inputs

Description

2017

(Level 1)

(Level 2)

(Level 3)

Assets:

Cash and cash equivalents
$ 27,792 $ 27,792 $ - $ -
Total
$ 27,792 $ 27,792 $ - $ -

~~NOTE 4 – ACQUISITIONS~~

~~2018 Acquisitions~~

In January 2018, we acquired all of the outstanding shares of common stock of Pay Systems of America, Inc. (“Pay Systems”), a provider of HR, payroll and employee benefits services. The aggregate consideration for the shares consisted of (i) $19,194 in cash and (ii) a subordinated promissory note (the “Pay Systems Note”) in the principal amount of $1,572, subject to adjustment, We funded the cash payment with cash on hand. The Pay Systems Note bears interest at an annual rate of 2.0% and is payable in two installments – one-half, plus accrued interest, on July 1, 2018 and the remaining principal balance and accrued interest on January 1, 2019.

In January 2018, we also completed the acquisitions of two other companies that are current resellers of our leading Human Resource Information System platform. We funded these two acquisitions with cash on hand, subordinated promissory notes and shares of Asure common stock.

In April 2018, we acquired all of the assets of a provider of outsourced HR, consulting, and professional services around payroll and employee benefits; and we acquired all of the share capital of a provider of a sensor-based solution that allows organizations across the world to streamline operations, create efficiencies, enhance productivity, and analyze employee engagement. We funded these acquisitions with cash (using borrowed funds under our Second Restated Credit Agreement) and subordinated promissory notes.

In April 2018, we also purchased a portfolio of customer accounts and the related contracts for payroll processing services (known as Evolution Payroll) from Wells Fargo for an aggregate purchase price of $10,450. The aggregate purchase price consisted of (i) $10,000 in cash and (ii) a subordinated promissory note (the “Evolution Payroll Note”) in the principal amount of $450. The Evolution Payroll Note bears interest at an annual rate of 2.0%, and the unpaid principal and all accrued interest under the Evolution Payroll Note is payable on April 9, 2020. To finance this transaction, we borrowed approximately $10,000 under our Second Restated Credit Agreement.



			Fair Value Measure at June 30, 2019
	Total Carrying Value at June 30, 2019		Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)




Assets:
Cash equivalents:
Money market funds	$	10,973	$	10,973	$	—	$	—
Funds held for clients
Money market funds	31,616		31,616		—		—
Short-term available-for-sale securities	4,556		—		4,556		—
Total	$	47,145	$	42,589	$	4,556	$	—



			Fair Value Measure at December 31, 2018
	Total Carrying Value at December 31, 2019		Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)




Assets:
Cash equivalents:
Money market funds	$	8,111	$	8,111	$	—	$	—
Funds held for clients
Money market funds	—		—		—		—
Short-term available-for-sale securities	4,256		—		4,256		—
Total	$	12,367	$	8,111	$	4,256	$	—

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

In July 2018, we acquired all of the capital stock of USA Payroll, Inc. and assets of its affiliates (“USA Payroll”), a payroll processing company based in Rochester, New York and a licensee of our Evolution software. The aggregate purchase price consisted of (i) $18,561 in cash; (ii) a subordinated promissory note (the “USA Payroll Notes”) in the principal amount of $3,263; and (iii) 225,089 unregistered shares of our common stock valued at $3,600 based on a volume-weighted average of the closing prices of our common stock during a 90-day period. We funded the cash payment with cash on hand. The USA Payroll Notes bear interest at an annual rate of 3.0%. Interest payments are due on July 1, 2019, July 1, 2020 and accrued interest and principal is due on July 1, 2021.

Except for the purchase of Pay Systems Evolution Payroll portfolio and USA Payroll, the 2018 acquisitions, individually, were not material to our results of operations, financial position, or cash flows. We have treated the purchase of the Evolution Payroll portfolio as an acquisition of assets, rather than as an acquisition of a business.

~~Purchase Price Allocation~~

Following is the purchase price allocation for the 2018 business acquisitions. We based the preliminary fair value estimate for the assets acquired and liabilities assumed for these acquisitions upon preliminary calculations and valuations. Our estimates and assumptions for these acquisitions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of those preliminary estimates that we have not yet finalized relate to certain tangible assets and liabilities acquired, and income and non-income based taxes.

We recorded the transactions, with the exception of the Evolution Payroll portfolio purchase, using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the dates of acquisitions. The $36,960 of intangible assets subject to amortization consist of $32,200 allocated to Customer Relationships, $2,100 for Developed Technology, $2,330 for Trade Names, and $330 for Noncompete Agreements. To value the Trade Names, we employed the relief from royalty method under the market approach. For the Noncompete Agreements, we employed a form of the income approach which analyzes the Company’s profitability with these assets in place, in contrast to the Company’s profitability without them. For the Customer Relationships and Developed Technology, we employed a form of the excess earnings method, which is a form of the income approach. The discount rate used in valuing these assets ranged from 13.0% to 33.0%, which reflects the risk associated with the intangible assets related to the other assets and the overall business operations to us. We estimated the fair values of the Trade Names using the relief from royalty method based upon a 1.0% royalty rate.

We believe significant synergies are expected to arise from these strategic acquisitions. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be deductible for tax purposes.

Assets Acquired

Pay Systems

USA Payroll

Others

Total

Cash & cash equivalents
$ 767 $ 470 $ 600 $ 1,837
Accounts receivable
54 114 2,609 2,777
Fixed assets
121 94 39 254
Inventory
- - 657 657
Other assets
49 13 1,014 1,076
Funds held for clients
10,976 20,439 14,050 45,465
Goodwill
8,871 12,388 10,373 31,632
Intangibles
7,240 14,280 15,440 36,960
Total assets acquired
$ 28,078 $ 47,798 $ 44,782 $ 120,658

Liabilities assumed

Accounts payable
113 39 1,170 1,322
Accrued other liabilities
951 393 2,983 4,327
Deferred revenue
- - 355 355
Client fund obligations
11,820 20,439 14,050 46,309
Total liabilities assumed
12,884 20,871 18,558 52,313

Net assets acquired
$ 15,194 $ 26,927 $ 26,224 $ 68,345

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

~~The following is a reconciliation of the purchase price to the fair value of net assets acquired at the date of acquisition:~~

Pay Systems

USA Payroll

Others

Total

Purchase price
$ 15,724 $ 27,450 $ 27,950 $ 71,124
Working capital adjustment
(469
)
66 210 (193
)
Adjustment to fair value of contingent liability
- - (1,761
)
(1,761
)
Adjustment to fair value of Asure’s stock
- (299 ) (104
)
(403
)
Debt discount
(61
)
(290 ) (71
)
(422
)
Fair value of net assets acquired
$ 15,194 $ 26,927 $ 26,224 $ 68,345

The purchase of the Evolution Payroll portfolio has been accounted for as an asset acquisition under the acquisition method of accounting. The amendments in ASU 2017-01 provide a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets and activities is not a business. Since the acquisition was determined to be an asset acquisition, the total value of the purchase consideration is allocated to the asset acquired. Management assessed the fair value of the promissory note and cash consideration as of April 1, 2018, which was as follows:

Fair Value

Cash
$ 10,000
Promissory note
450
Debt discount
(46
)
Total
$ 10,404

Fair value of asset acquired, Customer Relationships
$ 10,404

As an asset acquisition, we also capitalized approximately $40 of total costs incurred to complete the acquisition consisting of legal fees of approximately $30 and accounting fees of approximately $10. The total intangible asset of $10,444 is recorded in our consolidated balance sheet within Intangible Assets- Customer Relationships, and is being amortized over its estimated useful life of eight years.

Transaction costs incurred for the 2018 business acquisitions were $1,000 and $3,301 in the three and nine months ended September 30, 2018, respectively, and were expensed as incurred and included in selling, general and administrative expenses.

~~Contingent consideration~~

In connection with the acquisition of all of the assets of a provider of outsourced human resources, consulting, and professional services in April 2018, we recorded contingent consideration based upon the expected achievement of certain milestone goals. We will record any changes to the fair value of contingent consideration due to changes in assumptions used in preparing the valuation model in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

Contingent consideration is valued using a multi-scenario discounted cash flow method. The assumptions used in preparing the discounted cash flow method include estimates for outcomes if milestone goals are achieved and the probability of achieving each outcome. Management estimates probabilities and then applies them to management’s conservative case forecast, most likely case forecast and optimistic case forecast with the various scenarios. The Company retained a third party expert to assist in determining the value of the contingent consideration as of April 1, 2018.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

As of April 1, 2018, the third party expert determined the value of the contingent consideration for the acquisition was $489. The valuation of the contingent consideration was based on a Monte Carlo simulation model for fiscal 2017 to 2019. Management provided revenue projections (an unobservable input) of $3,075 for fiscal 2018 (partial year), and $4,408 for fiscal 2019, respectively. Based on current projections, we released the liability for the contingent consideration as of September 30, 2018, and recorded $489 of Other Income in the accompanying condensed consolidated statement of operations.

~~Unaudited Pro Forma Financial Information~~

The following unaudited summary of pro forma combined results of operations for the three and nine months ended September 30, 2018 and September 30, 2017 gives effect to our 2017 and 2018 business and asset acquisitions as if we had completed them on January 1, 2017. This pro forma summary does not reflect any operating efficiencies, cost savings or revenue enhancements that we may achieve by combining operations. In addition, we have not reflected certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, in the pro forma summary. We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations would have been had the acquisitions taken place as of January 1, 2017, nor is it indicative of future consolidated results of operations.

FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
2018

FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
2017

Revenue
$ 23,458 $ 27,163
Net income (loss)
$ (2,584
)
$ (1,758
)
Net income (loss) per common share:

Basic and diluted
$ (0.17
)
$ (0.14
)

Weighted average shares outstanding:

Basic and diluted
15,223 12,418

FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,

FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,

2018

2017

Revenue
$ 70,645 $ 76,590
Net income (loss)
$ (7,862
)
$ (5,408
)
Net income (loss) per common share:

Basic and diluted
$ (0.58
)
$ (0.52
)

Weighted average shares outstanding:

Basic and diluted
$ 13,591 $ 10,355

NOTE 54 – GOODWILL AND OTHER INTANGIBLE ASSETS

~~We accounted~~

The following table summarizes the changes in our goodwill:



Balance at December 31, 2018	$	111,387
Goodwill recognized upon acquisition	4,826
Adjustment to goodwill associated with acquisitions	(176		)
Foreign exchange adjustment to goodwill	(6		)
Balance at June 30, 2019	$	116,031

There has been no impairment of goodwill for ~~our historical acquisitions in accordance with ASC 805,~~ ~~Business Combinations~~~~. We recorded~~ the amount exceeding the fair value of net assets acquired at the date of acquisition as goodwill. We recorded intangible assets apart from goodwill if the assets had contractual or other legal rights or if the assets could be separated and sold, transferred, licensed, rented or exchanged. Our goodwill relates to acquisitions from 2011 through 2018.

periods presented.

~~Table of Contents~~

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

~~In accordance with ASC 350,~~ ~~Intangibles-Goodwill and Other,~~ we review and evaluate our long-lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that we may not recover their net book value. We test goodwill for impairment on an annual basis in the fourth fiscal quarter of each year, and between annual tests, if indicators of potential impairment exist, using a fair-value-based approach. There has been no impairment of goodwill for the periods presented. We amortize intangible assets not considered to have an indefinite useful life using the straight-line method over their estimated period of benefit, which generally ranges from one to nine years. Each reporting period, we evaluate the estimated remaining useful life of intangible assets and assess whether events or changes in circumstances warrant a revision to the remaining period of amortization or indicate that impairment exists. We have not identified any impairments of finite-lived intangible assets during any of the periods presented.

~~The following table summarizes the changes in our goodwill:~~

Balance at December 31, 2017
$ 77,348
Goodwill recognized upon acquisitions
31,632
Adjustments to Goodwill associated with acquisitions
(1,490
)
Foreign exchange adjustment to goodwill
67
Balance at September 30, 2018
$ 107,557

The gross carrying amount and accumulated amortization of our intangible assets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 are as follows:

September 30, 2018

Intangible Assets

Weighted Average
Amortization
Period (in Years)

Gross

Accumulated
Amortization

Net

Developed Technology
6.0 $ 14,849 $ (6,513
)
$ 8,336
Customer Relationships
7.4 81,030 (18,252
)
62,778
Reseller Relationships
7.0 853 (853
)
-
Trade Names
9.9 5,199 (1,142
)
4,057
Noncompete
5.1 1,022 (370
)
652
7.3 $ 102,953 $ (27,130
)
$ 75,823

December 31, 2017

Intangible Assets

Weighted Average
Amortization
Period (in Years)

Gross

Accumulated
Amortization

Net

Developed Technology
6.7 $ 11,925 $ (5,010
)
$ 6,915
Customer Relationships
9.5 37,096 (13,142
)
23,954
Reseller Relationships
7.0 853 (761
)
92
Trade Names
10.4 2,915 (884
)
2,031
Noncompete Agreements
6.1 692 (130
)
562
8.8 $ 53,481 $ (19,927
)
$ 33,554



		June 30, 2019
Intangible Assets	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization			Net

Developed Technology	6.0	$	14,800	$	(8,291	)	$	6,509
Customer Relationships	8.8	90,147		(25,423		)	64,724
Reseller Relationships	7.0	853		(853		)	0
Trade Names	12.0	5,315		(1,458		)	3,857
Noncompete Agreements	5.2	1,032		(596		)	436
	8.5	$	112,147	$	(36,621	)	$	75,526



		December 31, 2018
Intangible Assets	Weighted Average Amortization Period (in Years)	Gross		Accumulated Amortization			Net

Developed Technology	6.0	$	14,805	$	(7,065	)	$	7,740
Customer Relationships	8.5	85,094		(20,601		)	64,493
Reseller Relationships	7.0	853		(853		)	—
Trade Names	12.2	5,187		(1,241		)	3,946
Noncompete Agreements	5.2	1,032		(451		)	581
	8.3	$	106,971	$	(30,211	)	$	76,760

We record amortization expenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses recorded in Operating Expenses were $2,761 and $1,994, for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017 were $2,447 and $1,341, respectively, included in Operating Expenses.~~respectively. Amortization expenses recorded in Cost of Sales were $437 and ~~$106~~$437 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expenses for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 were $5,543 and ~~2017 were $6,038 and $3,230~~$3,591 included in Operating Expenses, and ~~$1,171~~$874 and ~~$319,~~$734, respectively, included in Cost of Sales.

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

The following table summarizes the future estimated amortization expense relating to our intangible assets as of ~~September~~June 30, ~~2018:~~

Calendar Years

2018 (October to December)
$ 2,838
2019
10,835
2020
9,999
2021
9,533
2022
9,207
2023
8,009
Thereafter
24,417
Total
$ 74,838
Developed Technology not yet in service
985
Net Intangible Assets
$ 75,823

2019:



Calendar Years
2019 (July to December)	$	5,919
2020	11,491
2021	11,000
2022	10,370
2023	9,148
2024	8,827
Thereafter	18,771
	$	75,526

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

NOTE 65 – NOTES PAYABLE

The following table summarizes our outstanding debt as of the dates indicated:

Notes Payable

Maturity

Stated Interest Rate

Balance as of
September 30, 2018

Balance as of
December 31, 2017

Subordinated Notes Payable- acquisitions

10/1/2019 – 5/25/2022
2.00% - 3.50 % 12,164 9,847
Term Loan – Wells Fargo Syndicate Partner

5/25/2022
10.55 % 52,238 34,125
Term Loan - Wells Fargo

5/25/2022
5.55 % 52,238 34,125
Total Notes Payable
$ 116,640 $ 78,097
Short-term notes payable
$ 5,374 $ 8,895
Long-term notes payable
$ 111,266 $ 69,202

On January 1, 2016, we adopted ASU 2015-03 for debt issuance costs on our term loan, on a retrospective basis. The impact of adopting ASU 2015-03 was the classification of all deferred financing costs as a deduction to corresponding debt in addition to the reclassification of deferred financing costs in other current and long-term assets to short and long-term notes payable.



	Maturity	Stated Interest Rate		Balance as of June 30, 2019		Balance as of December 31, 2018
Subordinated Notes Payable- acquisitions	10/1/2019 – 7/1/2021	2.00% - 3.00%		$	8,719	$	10,964
Term Loan – Wells Fargo Syndicate Partner	5/25/2022	10.74	%	55,824		52,106
Term Loan - Wells Fargo	5/25/2022	5.74	%	55,824		52,106
Total Notes Payable				120,367		115,176
Short-term notes payable				5,049		5,864
Long-term notes payable				$	115,318	$	109,312

The following table summarizes the debt issuance costs as of the dates indicated:

Notes Payable

Gross Notes Payable at
September 30, 2018

Debt Issuance Costs and
Debt Discount

Net Notes Payable at
September 30, 2018

Notes payable, current portion
$ 5,374 $ (872
)
$ 4,502
Notes payable, net of current portion
111,266 (2,700
)
108,566
Total Notes Payable
$ 116,640 $ (3,572
)
$ 113,068

Notes Payable

Gross Notes Payable at
December 31, 2017

Debt Issuance Costs and
Debt Discount

Net Notes Payable at
December 31, 2017

Notes payable, current portion
$ 8,895 $ - $ 8,895
Notes payable, net of current portion
69,202 (2,229
)
66,973
Total Notes Payable
$ 78,097 $ (2,229
)
$ 75,868

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~



Notes Payable	Gross Notes Payable at June 30, 2019		Debt Issuance Costs and Debt Discount			Net Notes Payable at June 30, 2019
Notes payable, current portion	$	5,049	$	(1,223	)	$	3,826
Notes payable, net of current portion	115,318		(2,476		)	112,842
Total Notes Payable	$	120,367	$	(3,699	)	$	116,668



Notes Payable	Gross Notes Payable at December 31, 2018		Debt Issuance Costs and Debt Discount			Net Notes Payable at December 31, 2018
Notes payable, current portion	$	5,864	$	(1,131	)	$	4,733
Notes payable, net of current portion	109,312		(2,083		)	107,229
Total Notes Payable	$	115,176	$	(3,214	)	$	111,962

The following table summarizes the future principal payments related to our outstanding ~~debt:~~

Year Ended

Gross Amount

December 31, 2018 (October to December)
$ 633
December 31, 2019
6,026
December 31, 2020
5,197
December 31, 2021
8,151
December 31, 2022
96,633
Gross Notes Payable
$ 116,640

debt as of June 30, 2019:

Year Ended Gross Amount
December 31, 2019 (July to December) $ 1,317
December 31, 2020 5,232
December 31, 2021 10,081
December 31, 2022 103,737
Gross Notes Payable $ 120,367

Term Loan - Wells Fargo

In March ~~2014,~~2018, we entered into a second amended and restated credit agreement (the ~~“Credit~~“Second Restated Credit Agreement”) with Wells Fargo, ~~as administrative agent,~~ and the lenders that are ~~party thereto.~~parties thereto, amending and restating the terms of the Amended and Restated Credit Agreement dated as of May 2017, which had previously amended and restated our credit agreement from March 2014. The Second Restated Credit Agreement contains customary events of default, including, among others, payment defaults, covenant defaults, judgment defaults, bankruptcy and insolvency events, cross defaults to certain indebtedness, incorrect representations or warranties, and change of control. In some cases, the defaults are subject to customary notice and grace period provisions. ~~In March 2014 and in connection with the Credit Agreement, we~~We and our wholly-owned active subsidiaries ~~entered into~~are also parties to a Guaranty and Security Agreement with Wells Fargo ~~Bank.~~Bank in connection with the our Second Restated Credit Agreement (and earlier versions of the credit agreement). Under the Guaranty and Security Agreement, we and each of our wholly-owned active subsidiaries have guaranteed all obligations under the Credit Agreement and granted a security interest in substantially all of our and our subsidiaries’ assets.

~~Second Amended~~

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and ~~Restated Credit Agreement~~

In March 2018, we entered into a second amended and restated credit agreement (the “Second Restated Credit Agreement”) with Wells Fargo, and the lenders that are parties thereto, amending and restating the terms of the Amended and Restated Credit Agreement dated as of May 2017.

per share data unless otherwise noted)

The Second Restated Credit Agreement provides for a total of $175,000 in available financing consisting of (a) $105,000 in the aggregate principal amount of term ~~loans, an increase of approximately $36,750;~~loans; (b) a $5,000 line of ~~credit,~~credit; (c) a $25,000 delayed draw term loan commitment for the financing of permitted ~~acquisitions, which is a new financing option for us;~~acquisitions; and (d) a $40,000 ~~accordion, an increase of $30,000. The accordion allows us to increase the amount of financing we receive from our lenders at our option.~~accordion. Financing under the delayed draw term loan commitment and accordion are subject to certain conditions as described in the Second Restated Credit Agreement.

The Second Restated Credit Agreement amends the applicable margin rates for determining the interest rate payable on the loans as follows:



Leverage Ratio	First Out Revolver Base Rate Margin	First Out Revolver LIBOR Rate Margin	First Out TL Base Rate Margin	First Out TL LIBOR Rate Margin	Last Out Base Rate Margin	Last Out LIBOR Rate Margin
≤ 3.25:1	4.25 percentage points	5.25 percentage points	1.75 percentage points	2.75 percentage points	6.75 percentage points	7.75 percentage points
> 3.25:1	4.75 percentage points	5.75 percentage points	2.25 percentage points	3.25 percentage points	7.25 percentage points	8.25 percentage points

The outstanding principal amount of the term loans is payable as follows:

$263 beginning on June 30, 2018 and the last day of each fiscal quarter thereafter up to March 31, 2020, plus an additional amount equal to 0.25% of the principal amount of all delayed draw term loans;

$656 beginning on June 30, 2020 and the last day of each fiscal quarter thereafter up to March 31, 2021, plus an additional amount equal to 0.625% of the principal amount of all delayed draw term loans; and

18$1,313 beginning on June 30, 2021 and the last day of each fiscal quarter thereafter, plus an additional amount equal to 1.25% of the principal amount of all delayed draw term loans.

The Second Restated Credit Agreement also:

amended our leverage ratio covenant;

amended our fixed charge coverage ratio to be not less than 1.25:1 at March 31, 2018 and each quarter-end thereafter; and

removed the TTM recurring revenue covenant.

In January 2019, we entered into a Consent and Amendment No. 2 to the Second Restated Credit Agreement (the “Consent and Amendment No. 2”), with Wells Fargo Bank, National Association and Goldman Sachs Specialty Lending Holdings, Inc. Under the terms and conditions of the Consent and Amendment No. 2, the agent and required lenders consented to our acquisition of Payroll Maxx LLC as a “permitted acquisition” and we borrowed a delayed draw term loan in the aggregate amount of $8,000. The Consent and Amendment No. 2 also amends, among other things, our leverage ratio covenant to increase the maximum ratio to 6.00:1 at March 31, 2019, June 30, 2019 and September 30, 2019 and then stepping down each quarter-end thereafter through December 31, 2020.

As of June 30, 2019 and December 31, 2018, $4,000 and $0 was outstanding and $1,000 and $5,000, respectively, was available for borrowing under the revolver.

As of June 30, 2019, we were in compliance with all financial covenants and all payments remain current. We expect to be in compliance with our debt agreements and related covenants over the next twelve months.

~~Table~~

NOTE 6 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables

Receivables from contracts with customers, net of ~~Contents~~allowance for doubtful accounts of $1,116 were $12,776 at June 30, 2019. Receivables from contracts with customers, net of allowance for doubtful accounts of $1,467, were $14,291 at December 31, 2018.

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

~~The outstanding principal amount of the term loans is payable as follows:~~

●	$263 beginning on June 30, 2018 and the last day of each fiscal quarter thereafter up to March 31, 2020, plus an additional amount equal to 0.25% of the principal amount of all delayed draw term loans;

●	$656 beginning on June 30, 2020 and the last day of each fiscal quarter thereafter up to March 31, 2021, plus an additional amount equal to 0.625% of the principal amount of all delayed draw term loans; and

●	~~$1,313 beginning on June 30, 2021 and the last day of each fiscal quarter thereafter, plus an additional amount equal to 1.25% of the principal amount of all delayed draw term loans.~~

~~The outstanding principal balance and all accrued and unpaid interest on the term and revolving loans is due on May 25, 2022.~~

~~The Second Restated Credit Agreement also:~~

●	amends our leverage ratio covenant to increase the maximum ratio to 6.50:1 at March 31, 2018 and June 30, 2018, 6.00:1 at September 30, 2018 and December 31, 2018 and then stepping down each quarter-end thereafter;

●	~~amends our fixed charge coverage ratio to be not less than 1.25:1 at March 31, 2018 and each quarter-end thereafter; and~~

●	~~removes the TTM recurring revenue covenant.~~

~~As of September 30, 2018 and December 31, 2017, $0 was outstanding and $5,000 was available for borrowing under the revolver.~~

As of September 30, 2018, we were in compliance with all covenants and all payments remain current. We expect to be in compliance or be able to obtain compliance through debt repayments with available cash on hand or cash we expect to generate from the ordinary course of operations over the next twelve months.

~~NOTE 7 – Contracts with Customers~~

~~Receivables~~

Receivables from contracts with customers, net of allowance for doubtful accounts of $706, were $15,878 at September 30, 2018. Receivables from contracts with customers, net of allowance for doubtful accounts of $425, were $12,032 at December 31, 2017.

Deferred Commissions

Deferred ~~commissions~~commission costs from contracts with customers were ~~$3,371~~$4,246 and ~~$636~~$3,675 at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018, respectively and are included in other assets on the accompanying condensed consolidated balance sheet. The amount of amortization recognized infor the ~~period~~three and six months ended June 30, 2019 was ~~$251.~~

$471 and $816, respectively.

Deferred Revenue

Revenue of ~~$2,483~~$3,328 and $8,188 was recognized during the three and six months ended ~~September~~June 30, ~~2018~~2019 that was included in the deferred revenue balance at the beginning of ~~the~~each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of ~~September~~June 30, ~~2018,~~2019, approximately ~~$54,651~~$47,279 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately ~~51%~~63% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three and six months ended June 30, 2019 and June 30, 2018, there were no customers who individually represented 10% or more of consolidated revenue.

NOTE 7 – LEASES

We have entered into eighteen office space lease agreements, which qualify as operating leases under the Topic 842. Under such leases, the lessors receive annual minimum (base) rent. The leases have original terms (excluding extension options) ranging from one to ten years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We record base rent expense under the straight-line method over the term of the lease. In the accompanying condensed consolidated statements of comprehensive loss, rent expense is included in operating expenses under selling, general and administrative expenses. Total straight line rent expense and deprecation of the ROU asset for the three and six months ended June 30, 2019 was $405 and $816, respectively.

As of June 30, 2019, we had lease liabilities of $7,881, of which $1,631 are classified as other current accrued liabilities, and ROU assets of $7,307, which are included in other assets on the accompanying condensed consolidated balance sheet. The current and non-current portions of the lease liabilities are included in other accrued liabilities and other liabilities, respectively, on the accompanying condensed consolidated balance sheet. For purposes of calculating the ROU assets and lease liabilities for such leases, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option. Our incremental borrowing rate of 9.00% is estimated to approximate our interest rate on a collateralized basis with similar terms and payments, using a portfolio approach. The weighted average remaining lease term of leases with a lease liability as of June 30, 2019 is 6.0 years (excluding extension options).

~~Table of Contents~~

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows:



	Total Operating Leases
2019 (remainder)	$	1,191
2020	2,100
2021	1,947
2022	1,417
2023	711
Thereafter	2,977
Total minimum lease payments	10,343
Less imputed interest	(2,462		)
Total lease liabilities	$	7,881

NOTE 8 – SHARE BASED COMPENSATION

~~In May 2018, our stockholders approved~~

We have one active equity plan, the ~~Asure Software, Inc.~~ 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, ~~supersedes and replaces in its entirety the~~approved by our shareholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”), ~~and no further awards will be granted under the 2009 Plan;~~ however, the terms and conditions of the 2009 Plan ~~will continue~~continues to govern any outstanding awards previously granted ~~thereunder.~~

under the 2009 Plan.

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) ~~750,000~~1,350,000 shares, and (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are ~~cancelled~~canceled or otherwise terminate following the effective date of the 2018 Plan. We have ~~1,568,398~~1,502,148 options granted and outstanding and ~~224,589~~752,039 shares available for grant pursuant to the 2018 Plan as of ~~September~~June 30, ~~2018.~~

2019. In May 2019, our shareholders approved a one-time program to exchange underwater options to purchase shares of our common stock held by eligible employees for a lesser number of restricted stock units under the Asure Software, Inc. 2018 Incentive Award Plan. We have twelve months from May 2019 to implement this one-time program.

Share based compensation for our stock option plans for the three months ended ~~September~~June 30, 2019 and June 30, 2018 were $392 and ~~September 30, 2017 were $363 and $138,~~$329, respectively, and ~~$887~~$1,003 and ~~$363~~$523 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. We issued ~~2,000~~85,000 shares of common stock related to exercises of stock options for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~51,000~~24,000 for the three months ended ~~September~~June 30, ~~2017,~~2018, respectively.

We issued 8,000 and no shares of common stock related to the issuance of vested restricted stock units for the three months ended June 30, 2019 and 2018, respectively.

NOTE 9 – OTHER COMPREHENSIVE LOSS

Comprehensive income (loss) represents a measure of all changes in equity that result from recognized transactions and other economic events other than those resulting from investments by and distributions to shareholders. Our other comprehensive income (loss) includes foreign currency translation adjustments.

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax:

Foreign Currency Items

Accumulated Other
Comprehensive Loss Items

Beginning balance, December 31, 2017
$ (63
)
$ (63
)
Other comprehensive loss before reclassifications
(746
)
(746
)
Amounts reclassified from accumulated other comprehensive income (loss)
— —
Net current-period other comprehensive loss
(746
)
(746
)
Ending balance, September 30, 2018
$ (809
)
$ (809
)



	Foreign Currency Items			Accumulated Other Comprehensive Loss Items			Total Accumulated Other Comprehensive Loss Items
Beginning balance, December 31, 2018	$	(828	)	$	(78	)	$	(906	)
Foreign currency translation gains	(46		)	—			(46		)
Unrealized losses on marketable securities	—			26			26
Net current-period other comprehensive loss	(46		)	26			(20		)
Ending balance, June 30, 2019	$	(874	)	$	(52	)	$	(926	)

ASURE SOFTWARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data unless otherwise noted)

The following table presents the tax benefit (expense) allocated to each component of other comprehensive income (loss):

Three Months Ended September 30, 2018

Before Tax

Tax Benefit

Net of Tax

Foreign currency translation adjustments
$ (211
)
$ — $ (211
)
Unrealized net losses (101 ) (101 )
Other comprehensive loss
$ (312
)
$ — $ (312
)

Nine Months Ended September 30, 2018

Before Tax

Tax Benefit

Net of Tax

Foreign currency translation adjustments
$ (645
)
$ — $ (645
)
Unrealized net losses (101 ) (101 )
Other comprehensive loss
$ (746
)
$ — $ (746
)



	Three Months Ended June 30, 2019
	Before Tax			Tax Benefit		Net of Tax
Foreign currency translation adjustments	$	(46	)	$	—	$	(46	)
Unrealized loss on marketable securities	26			—		$	26
Other comprehensive loss	$	(20	)	$	—	$	(20	)

~~Table of Contents~~

~~ASURE SOFTWARE, INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Amounts in thousands, except share and per share data unless otherwise noted)~~

NOTE 10 – NET LOSS PER SHARE

We compute net loss per share based on the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options. We compute the number of common share equivalents, which includes stock options, using the treasury stock method. We have excluded stock options to acquire ~~1,568,000~~approximately 1,502,000 and 1,394,000 shares for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and June 30, 2018, ~~and 904,000 shares for the nine months ended September 30, 2017~~respectively, from the computation of the dilutive stock options because the effect of including the stock options would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per common share for the three ~~and nine~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017:~~

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2018

2017

2018

2017

Net income (loss)
$ (3,584
)
$ (1,281
)
$ (9,277
)
$ (4,177
)

Weighted-average shares of common stock outstanding
15,223,000 12,418,000 13,591,000 10,355,000
Dilutive effect of employee stock options
- - - -
Weighted average shares for diluted net income (loss) per share
15,223,000 12,418,000 13,591,000 10,355,000
Basic net income (loss) per share
$ (0.24
)
$ (0.10
)
$ (0.68
)
$ (0.40
)
Diluted net income (loss) per share
$ (0.24
)
$ (0.10
)
$ (0.68
)
$ (0.40
)
2018:



	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
Net loss	$	(4,967	)	$	(3,768	)	$	(7,861	)	$	(5,693	)
Weighted-average shares of common stock outstanding	15,444,000			12,939,000			15,425,000			12,762,000
Basic and diluted net loss per share	$	(0.32	)	$	(0.29	)	$	(0.51	)	$	(0.45	)

NOTE 11 – SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date of the filing of this Quarterly Report on Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the condensed consolidated financial statements as of ~~September~~June 30, ~~2018,~~2019, and events which occurred subsequent to ~~September~~June 30, ~~2018~~2019 but were not recognized in the condensed consolidated financial statements. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Report represent forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results of operations, levels of activity, economic performance, financial condition or achievements to be materially different from future results of operations, levels of activity, economic performance, financial condition or achievements as expressed or implied by such forward-looking statements. Asure has attempted to identify these forward-looking statements with the words ~~“believes,~~“believe,” ~~“estimates,~~“estimate,” ~~“plans,~~“continue," "seek," plan,” ~~“expects,~~“expect,” ~~“anticipates,~~"intend," “anticipate,” “may,” "will," “could” and other similar expressions. Although these forward-looking statements reflect management’s current plans and expectations, which we believe are reasonable as of the filing date of this report, they inherently are subject to certain risks and uncertainties. These risks and uncertainties include — but are not limited to — our ability to achieve or sustain profitability; adverse changes in the economy, financial markets, and credit markets; delays or reductions in information technology spending; the development of the market for cloud based workplace applications; product development; market acceptance of new products and product improvements; our ability to retain or increase our customer base; security breaches; errors, disruptions or delays in our services; privacy concerns and laws; changes in our sales cycle; competition, including pricing pressures, entry of new competitors, and new technologies; intellectual property enforcement and litigation; our ability to obtain additional capital; our ability to hire, retain and motivate employees; our ability to manage our growth; our ability to realize benefits from acquisitions; limited or single sources of supply of key components; the level of our indebtedness; changes in sales may not be immediately reflected in our operating results due to our subscription model; changes in U.S and foreign

laws and regulations; changes in the Internet infrastructure; disruptions in computing and communication infrastructure; and changes in accounting standards. Please refer to Part II, Item IA, “Risk Factors” of this Form 10-Q and Part I, Item IA, “Risk Factors” of our most recently filed Annual Report on Form 10-K for a further description of these and other factors. Asure is under no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.

OVERVIEW

The following review of Asure’s financial position as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, and ~~the~~ results of operations ~~and cash flows~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017~~2018 should be read in conjunction with our ~~2017~~2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Asure’s internet website address is http://www.asuresoftware.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after they are electronically filed, or furnished to, the Securities and Exchange Commission. Asure’s internet website and the information contained ~~therein~~in our website or connected ~~thereto~~to our website is not incorporated into this Quarterly Report on Form 10-Q.

Asure is a leading provider of Human Capital Management (“HCM”) and ~~Workplace~~Workspace Management, offering intuitive and innovative cloud-based solutions designed to help organizations of all sizes and complexities build companies of the future. Our cloud platforms ~~enables~~enable clients worldwide to better manage their people and space in a mobile, digital, multi-generational, and global landscape. Asure’s offerings include a fully-integrated HCM platform, flexible benefits and compliance administration, HR consulting, and time and labor management as well as a full suite of Agile ~~Workplace~~Workspace solutions for conference room scheduling, desk sharing programs, and real estate optimization.

Asure’s platform vision is to help clients proactively manage costs associated with their three most expensive assets, real estate, labor and technology, while creating an employee experience that fosters efficiency, productivity and engagement.

Asure serves approximately 10,000 direct clients in 80 countries, ranging from global Fortune 500 clients to small and mid-sized businesses. Our mission guides the work we do each day; it is “To deliver innovative technology with the passion to empower every client’s workspace and the commitment to make their workdays easier.”

The Asure product strategy is driven by three primary trends in the market: mobilization, globalization and technology. Asure offers four product lines: AsureSpace™, AsureForce®, AsureHCM and AsureEvolution. AsureHCM and AsureEvolution are our Mid-market and SMB/Channel HCM platforms respectively, which include AsureBenefits and AsureConsulting. AsureSpace™ Agile ~~Workplace~~Workspace solutions enable organizations to optimize their real estate investment and create a digital ~~workplace~~workspace that empowers mobile and virtual employees, while streamlining internal operations. AsureForce® Time and Labor Management helps organizations optimize their workforce while controlling labor administration costs and activities.

For all of the Asure product lines, support and professional services are key elements of our value proposition and overall solution. In addition to state-of-the-art hosting platforms and regular software upgrades and releases, Asure gives our clients easy access to our skilled support team. Our services and support representatives are knowledgeable not just in the Asure solution, but also in their respective industries and provide advice and guidance on best practices and change management strategies. From installation to training and post-live support, our professional services team delivers a proficient customer experience on a global scale.

~~Table of Contents~~

Our sales and marketing strategy targets a wide range of ~~audiences,~~audiences: from small and medium-sized businesses to enterprise organizations throughout the United States, Europe and Asia/Pacific. Our unique blend of products allow us to compete in every industry, and we generate sales and opportunities through our direct sales team and our channel partners.

RESULTS OF OPERATIONS

($ in thousands)

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

The following table sets forth, for the fiscal periods indicated, the percentage of total ~~revenue~~revenues represented by certain items in Asure’s Condensed Consolidated Statements of Comprehensive Income ~~(Loss):~~

FOR THE THREE MONTHS ENDED
SEPTEMBER 30,

FOR THE NINE MONTHS ENDED
SEPTEMBER 30,

2018

2017

2018

2017

Revenue
100
%
100
%
100
%
100
%
Gross margin
63.9 78.1 67.1 77.9
Selling, general and administrative
47.1 60.9 51.8 64.6
Research and development
15.0 5.7 10.1 6.4
Amortization of intangible assets
10.4 8.6 9.4 8.3
Total operating expenses
72.5 75.2 71.2 79.2
Other loss, net
(7.9
)
(10.6
)
(9.8
)
(8.4
)
Net income (loss)
(15.3
)
(8.3
)
(14.4
)
(10.7
)

~~THREE AND NINE MONTHS ENDED SEPTEMBER~~ ~~30, 2018 AND 2017 (Amounts in thousands)~~

Loss:



	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019		2018	2019	2018
Revenue	100.0	%	100%	100.0%	100%
Gross margin	60.3		66.8	64.1	68.9
Selling, general and administrative	47.7		53.4	47.7	54.4
Research and development	7.6		7.2	8.2	7.3
Amortization of intangible assets	11.1		9.2	10.7	8.7
Total operating expenses	66.4		69.8	66.7	70.4
Total other loss, net	(12.4	)	(12.5)	(11.3)	(10.9)
Net loss	(20.0	)	(17.3)	(15.2)	(13.9)

Revenue

Our revenue was derived from the following sources (in thousands):

FOR THE THREE
MONTHS ENDED
SEPTEMBER 30,

Increase

Revenue

2018

2017

(Decrease)

%

Cloud
$ 18,390 $ 11,062 $ 7,328 66.2
Hardware
1,457 1,003 454 45.3
Maintenance and support
1,264 1,777 (513
)
(28.9
)
Professional services
2,347 1,685 662 39.3
Total revenue
$ 23,458 $ 15,527 $ 7,931 51.1

FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,

Increase

Revenue

2018

2017

(Decrease)

%

Cloud
$ 51,149 $ 27,724 $ 23,425 84.5
Hardware
3,612 3,651 (39
)
(1.1
)
Maintenance and support
3,985 4,325 (340
)
(7.9
)
Professional services
5,783 3,434 2,349 68.4
Total revenue
$ 64,529 $ 39,134 $ 25,395 64.9



	For the Three Months Ended June 30,				Increase (Decrease)
Revenue	2019		2018		Increase (Decrease)		%
Recurring	$	20,433	$	17,749	$	2,684	15.1
Professional services, hardware and other	4,408		4,018		390		9.7
Total revenue	$	24,841	$	21,767	$	3,074	14.1

	For the Six Months Ended June 30,				Increase (Decrease)
	2019		2018		Increase (Decrease)		%
Recurring	$	43,994	$	35,234	$	8,760	24.9
Professional services, hardware and other	7,607		5,837		1,770		30.3
Total revenue	$	51,601	$	41,071	$	10,530	25.6

Total revenue represents our consolidated ~~revenue,~~revenues, including sales of our scheduling software, time and attendance and human resource software, as well as complementary hardware devices to enhance our software products. ~~Most product groupings include~~Recurring revenue consists of cloud ~~revenue, hardware~~ revenue, maintenance and support revenue and interest earned on client funds. Professional services, hardware and other revenue consists of hardware revenue, on premise software license revenue as well as installation ~~and~~ services and other professional services revenue. Revenue mix varies by product.

Revenue for the three months ended ~~September~~June 30, ~~2018~~2019 was ~~$23,458,~~$24,841, an increase of ~~$7,931,~~$3,074, or ~~51.1%~~14.1%, from the ~~$15,527~~$21,767 reported for the three months ended ~~September~~June 30, ~~2017. The largest~~2018. Recurring revenue increased primarily due to an increase ~~was~~ in cloud ~~revenue, which increased $7,328, or 66.2% from the third quarter of 2017.~~revenue. Cloud revenue increased $2,897, or 17.7%, primarily due to our 2017 and 2018 acquisitions and our continued emphasis on selling integrated cloud based solutions. ~~Hardware and professional services revenue also increased as compared to the three months ended September 30, 2017, due to increased demand of our cloud based services.~~

~~Table of Contents~~

Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018 were $64,259,~~2019 was $51,601, an increase of ~~$25,395,~~$10,530, or ~~64.9%~~25.6%, from the ~~$39,134~~$41,071 reported for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This increase was primarily due to an increase in cloud and ~~professional services~~hardware revenue. Cloud revenue increased ~~$23,425,~~$8,589, or ~~84.5%~~26.2%, primarily as a result of the cloud revenue recognized by the ~~2017 and~~ 2018 acquisitions and our continued emphasis on selling integrated cloud based solutions. ~~Professional services~~Hardware revenue also increased as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, due to ~~an increase in consulting services revenue offset by slight reduction in hardware and maintenance and support revenue.~~

the timing of work performed on contracts.

Although our total customer base is widely spread across industries, our sales are concentrated in certain industry sectors, including corporate education, healthcare, government, legal and non-profit. We continue to target small and medium sized businesses and divisions of larger enterprises in these same industries as prospective customers. Geographically, we sell our products worldwide, but sales are largely concentrated in the United States, Canada and Europe. Additionally, we have reseller partners in North America, UK, South Africa and Asia Pacific.

In addition to continuing to develop our workforce and Agile ~~Workplace~~Workspace management solutions and release of new software updates and enhancements, we continue to actively explore other opportunities to acquire additional products or technologies to complement our current software and services.

Gross Profit and Gross Margin

Consolidated gross profit for the three months ended ~~September~~June 30, ~~2018~~2019 was ~~$14,987, an~~$14,990, a slight increase of ~~$2,856,~~$443 or ~~23.5%~~3.0%, from the ~~$12,131~~$14,547 reported for the three months ended ~~September~~June 30, ~~2017.~~2018. Gross ~~profit increased in line with the increase in revenue. However, due in part to a shift in product mix, inventory write-offs and amortization of capitalized software, gross~~ margin as a percentage of revenue ~~decreased to 63.9% from 78.1%~~was 60.3% for the three months ended ~~September~~June 30, ~~2018~~2019 as compared to 66.8% for the three months ended June 30, 2018. The decrease in gross margin is due to the mix of hardware and ~~September 30, 2017, respectively.~~ professional services revenue, with an increase in HCM revenue, which typically has lower margins.

Consolidated gross ~~margin~~profit for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$43,281,~~$33,052, an increase of ~~$12,807~~$4,758 or ~~42.0%~~16.8%, from the ~~$30,474~~$28,294 reported for the nine months ended ~~September~~June 30, ~~2017.~~2018. Gross margins as a percentage of revenue were ~~67.1%~~64.1% and ~~77.9%~~68.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. HCM revenue, which typically has lower gross margins, represents a larger portion of our revenue mix, therefore, resulting in a slight decrease in the gross margin as a percentage of revenue.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses primarily consist of salaries and related expenses, including stock-based expenses, for sales and marketing staff, including commissions, as well as marketing programs, which include events, corporate communications and product marketing activities. SG&A also consists of salaries and related expenses, including stock-based expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, and other corporate expenses such as transaction costs for acquisitions. SG&A expenses for the three months ended ~~September~~June 30, ~~2018~~2019 were ~~$11,052,~~$11,859, an increase of ~~$1,593,~~$226, or ~~16.8%~~1.9%, from the ~~$9,459~~$11,633 reported for the three months ended ~~September~~June 30, ~~2017.~~2018. SG&A expenses as a percentage of revenue ~~were 47.1% and 60.9%~~decreased slightly to 47.7% from 53.4% for the three months ended ~~September~~June 30, 2019 and June 30, 2018, ~~and September 30, 2017,~~ respectively.

SG&A expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were ~~$33,394,~~$24,624, an increase of ~~$8,108,~~$2,282, or ~~32.1%~~10.2%, from the ~~$25,286~~$22,342 reported for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. SG&A expenses as a percentage of revenue ~~were 51.8% and 64.6%~~slightly decreased to 47.7% from 54.4% for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, respectively.

SG&A expenses were higher in the three and nine months ended September 30, 2018 as compared to the same period in 2017 primarily due to the acquisitions and integration expenses related to the acquisitions in 2017 and 2018.

We continue to ~~evaluate any unnecessary expenses~~expand and ~~any increases~~increase selling costs as we focus on expanding recognition of our brand, increase our direct sales personnel, as well as continue to invest in ~~SG&A designed~~a new ERP system and resources to ~~enhance future revenue growth.~~

improve the financial reporting process.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of salaries and related expenses, including stock-based expenses for employees supporting our R&D activities. R&D expenses for the three months ended ~~September~~June 30, ~~2018~~2019 were ~~$3,514, an~~$1,878, a slight of increase of ~~$2,631,~~$320, or ~~298.0%~~20.5%, from the ~~$883~~$1,558 reported for the three months ended ~~September~~June 30, ~~2017.~~2018. R&D expenses as a percentage of revenues increased to 7.6% from 7.2% for the three months ended June 30, 2019 and June 30, 2018, respectively.

R&D expenses for the six months ended June 30, 2019 were $4,229, an increase of $1,248, or 41.9%, from the $2,981 reported for the six months ended June 30, 2018. R&D expenses as a percentage of revenue ~~were 15.0% and 5.7%~~was 8.2% as compared to 7.3% for the ~~three~~six months ended ~~September~~June 30, 2019 and 2018, respectively.

We continue to expand our technical resources by increasing headcount, strategic partnerships and ~~September 30, 2017, respectively.~~

integration development; introducing new hardware products for 2019; as well as increasing investments into our initiative to migrate platforms to Amazon Web Services (“AWS”). We have also made significant investment outside of core R&D expenses for the nine months ended September 30, 2018 were $6,495, an increase of $4,007, or 161.1%, from the $2,488 reported for the nine months ended September 30, 2017. R&D expenses as a percentage of revenue were 10.1%dollars into compliance and ~~6.4% for the nine months ended September 30, 2018~~certifications, including SOC II Type 2 certifications, GDPR compliance, FedRamp certification (AsureSpace) and ~~2017, respectively.~~

other initiatives.

We also continue to enhance our products and technologies through organic improvements as well as through acquired intellectual property. We will continue to expand the breadth of integration between our solutions, allowing direct clients and resellers the ability to easily add and implement components across our entire solution set. We believe that our expanded investment in SaaS hosting, mobile and hardware technologies lays the ground work for broader market opportunities, and represents a key aspect of our competitive differentiation. Native mobile applications, ~~reporting and analytics,~~QR Code integration, expanded web service integration and other technologies are all part of our initiatives.

~~Table of Contents~~

Our development efforts for future releases and enhancements are driven by feedback received from our existing and potential customers and by gauging market trends. We believe we have the appropriate development team to design and ~~further improve~~enhance our ~~workforce management solutions.~~

solution suite and integrated platform.

In the second quarter of 2019, we released new hardware products across all of our product lines, necessitating increased inventory expenses and affecting cash flow. R&D expenses during this quarter focused on new product releases and roadmap items shared at our annual user conference in June 2019, and are in line with our general objectives noted previously.

Amortization of Intangible Assets

Amortization expenses for the three months ended ~~September~~June 30, ~~2018~~2019 were ~~$2,447,~~$2,761, an increase of ~~$1,106,~~$767, or ~~82.5%~~38.5%, from the ~~$1,341~~$1,994 reported for the three months ended ~~September~~June 30, ~~2017.~~2018. Amortization expenses as a percentage of revenue were ~~10.4%~~11.1% and ~~8.6%~~9.2% for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were ~~$6,038,~~$5,543, an increase of ~~$2,808,~~$1,952, or ~~86.9%~~54.3% compared to ~~$3,230,~~$3,591, reported for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Amortization expenses as a percentage of revenue were ~~9.4%~~10.7% and ~~8.3%~~8.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increases are due to the amortization recorded on the intangibles acquired in the acquisitions during ~~2017~~2018 and ~~2018.~~

the first quarter of 2019.

Other Income and ~~Loss~~

Expense

Other ~~loss~~expense for the three months ended ~~September~~June 30, ~~2018~~2019 was ~~$1,861,~~$3,091, an increase of ~~$217,~~$369, or ~~13.2%~~13.5%, from the ~~$1,644~~$2,722 reported for the three months ended ~~September~~June 30, 2017. Other loss as a percentage of revenue was 7.9% and 10.6% for the three months ended September 30, 2018 and September 30, 2017, respectively. Other loss for the nine months ended September 30, 2018 was $6,343, an increase of $3,064, or 93.4%, from the $3,279 reported for the nine months ended September 30, 2017.2018. Other expense as a percentage of revenue was ~~9.8%~~consistent at 12.4% and ~~8.4%~~12.5% for the ~~nine~~three months ended ~~September~~June 30, 2019 and June 30, 2018, ~~and 2017,~~ respectively. Other ~~loss~~expense for the six months ended June 30, 2019 was $5,845, an increase of $1,363, or 30.4%, from the $4,482 reported for the six months ended June 30, 2018. Other expense as a percentage of revenue was 11.3% and 10.9% for the six months ended June 30, 2019 and 2018, respectively. Other expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are composed primarily of interest expense on notes payable. The ~~increases~~increase over the ~~same periods~~six months ended 2018 is primarily comprised of an increase in ~~2017 are primarily~~interest expense due to the ~~additional~~higher debt ~~amount we~~balances resulting from our Second Restated Credit Agreement and debt incurred ~~under~~in connection with our ~~amended~~acquisitions in the second half of 2018 and ~~restated credit agreement and a higher interest rate payable on a portion~~the first quarter of ~~such debt. In addition, in~~2019.

Income Taxes

For the three months ended ~~September~~June 30, 2019 and 2018, we ~~recorded $489 of other income related to the release of contingent consideration.~~

~~Income Taxes~~

~~Provision~~incurred a provision for income tax ~~expense/(benefit) was $(303)~~expense of $368 and ~~$85 for the three months ended September 30, 2018 and 2017, respectively,~~$408, a decrease of ~~$388,~~$40, or ~~(456.5)%. Provision~~9.9%, respectively. We incurred a provision for income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2018 was $288, a decrease~~2019 of ~~$80,~~$672, an increase of $81, or ~~21.7%~~13.7%, from ~~the $368~~$591 reported for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively. The decrease in income tax expense over these periods is primarily due to the Company determining that indefinite lived goodwill would provide a source of income to realize indefinite lived deferred tax assets. The Company continues to analyze changes under the Tax Act and anticipates recording any additional resulting adjustment within the measurement period.

Net Income (Loss)

We incurred a net loss of ~~$3,584,~~$4,967, or ~~$(0.24)~~$(0.32) per share, during the three months ended ~~September~~June 30, ~~2018,~~2019, compared to net loss of ~~$1,281,~~$3,768, or ~~$(0.10)~~$(0.29) per share, during the three months ended ~~September~~June 30, ~~2017.~~2018. Net loss as a percentage of total revenues was 20.0% and 17.3% for the three months ended June 30, 2019 and 2018, respectively.

We incurred a net loss of $7,861, or $(0.51) per share, during the six months ended June 30, 2019, compared to a net loss of $5,693, or $(0.45) per share reported for the six months ended June 30, 2018. Net loss as a percentage of total revenue was ~~15.3% and 8.3%~~15.2% for the ~~three~~six months ended ~~September~~June 30, ~~2018 and 2017, respectively.~~

We incurred a net loss of $9,277, or $(0.68) per share, during the nine months ended September 30, 2018, compared to a net loss of $4,177, or $(0.40) per share reported for the nine months ended September 30, 2017. Net loss as a percentage of total revenue was 14.4% for the nine months ended September 30, 20182019 compared to net loss of ~~10.7%~~13.9% of total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

2018.

We intend to continue to implement our corporate strategy for growing our software and services business by modestly investing in areas that directly generate revenue and positive cash flows for the Company. However, uncertainties and challenges remain and there can be no assurance that we can successfully grow our ~~revenue~~revenues or achieve profitability during the remainder of fiscal year ~~2018.~~

2019.

~~Table of Contents~~

LIQUIDITY AND CAPITAL RESOURCES (Amounts in thousands)

September 30,

December 31,

2018

2017

Working capital
$ 17,844 $ 17,026
Cash and cash equivalents
19,194 27,792

For the Nine Months Ended

September 30,

2018

2017

Net Cash used in operating activities
$ (6,062
)
$ (2,083
)
Net Cash used in investing activities
(53,788
)
(38,351
)
Net Cash provided by financing activities
51,380 55,123



	June 30,		December 31,
	2019		2018
Working capital	$	5,289	$	11,443
Cash and cash equivalents	14,656		15,444



	For the Six Months Ended
	June 30,
	2019			2018
Net cash provided by (used in) operating activities	$	2,842		$	(4,996	)
Net cash provided by (used in) investing activities	21,396			(27,971		)
Net cash (used in) provided by financing activities	(25,042		)	52,517

Working Capital. We had working capital of ~~$17,844~~$5,289 at ~~September~~June 30, ~~2018, an increase~~2019, a decrease of ~~$818~~$6,154 from working capital of ~~$17,026~~$11,443 at December 31, ~~2017.~~2018. Working capital ~~at September~~as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 includes ~~$12,110~~$11,686 and ~~$13,078~~$11,849 of ~~short-term~~short term deferred revenue, respectively. Deferred revenue is an obligation to perform future services. We expect that deferred revenue will convert to future revenue as we perform our services, but this does not represent future payments. Deferred revenue can vary based on seasonality, expiration of initial multi-year contracts and deals that are billed after implementation rather than in advance of service delivery.

~~We attribute~~

Operating Activities. Net cash provided by operating activities of $2,842 for the six months ended June 30, 2019 was primarily driven by a net loss of $7,861, a decrease in accounts receivable of $1,812, resulting from cash collections in the quarter, an increase in ~~our working capital~~accounts payables of $1,259, and non-cash adjustments to ~~the sale~~net loss of ~~2,375,000 shares of common stock through our public offering in June 2018. We realized net proceeds of approximately $39,156 after deducting underwriting discounts~~$10,012, primarily due to higher depreciation and ~~estimated offering expenses.~~amortization expense. This iswas offset by ~~the use~~an increase in inventory of ~~$65,966~~$2,082 and a decrease in deferred revenue of ~~cash to fund the acquisitions in 2018.~~

~~Operating Activities~~.$256. Net cash used in operating activities ~~was $6,062~~of $4,996 for the ~~nine~~six months ended ~~September~~June 30, ~~2018. The $6,062 of cash used in operating activities during the first nine months of~~ 2018 was primarily driven by a net loss of ~~$9,277,~~$5,693, an increase in accounts receivable of ~~$6,587~~$2,576, and ~~an increase~~a decrease in ~~other assets~~deferred revenue of ~~$2,250.~~$1,294. This was offset by non-cash adjustments of ~~$10,493.~~

$7,487.

Investing Activities. Net cash ~~used in operating~~provided by investing activities ~~was $2,083~~of $21,396 for the ~~nine~~six months ended ~~September~~June 30, ~~2017. The $2,083~~2019 is primarily due to the net change in funds held for clients offset by the acquisition of ~~cash used~~Payroll Maxx in ~~operating activities during~~ the first ~~nine months~~quarter of 2017 was primarily driven by a net loss of $4,177, an increase in accounts receivable of $4,450, an increase in prepaids and other assets of $471, and a decrease in accounts payable of $569. This was offset by non-cash adjustments to net loss of $5,027, an increase in deferred revenue of $1,963, and an increase in accrued expenses and other long-term obligations of $881.

~~Investing Activities~~.2019. Net cash used in investing activities ~~was $53,788 and $38,351~~of $27,971 for the ~~nine~~six months ended ~~September 30, 2018 and 2017, respectively. Cash used in investing activities for the nine months ended September~~June 30, 2018 is primarily due to the acquisitions in ~~2018. Cash used in investing for the nine months ended September 30, 2017 is primarily due to acquisitions in 2017, partially~~January 2018 and April 2018, offset by ~~an increase~~a decrease in funds held for ~~clients.~~

clients

Financing Activities. Net cash used in financing activities was $25,042 for the six months ended June 30, 2019. We incurred $12,000 of indebtedness. This was offset by debt financing fees of $1,102 and the net change in client fund obligations of $32,238. Net cash provided by financing activities ~~of $51,380~~was $52,517 for the ~~nine~~six months ended ~~September~~June 30, ~~2018 was primarily due to an increase~~2018. We incurred $41,290 of ~~$41,290 in our~~ indebtedness and net proceeds of approximately ~~$39,156~~$39,220 from the issuance of our common stock in an underwritten public offering we completed in June 2018, partially offset by payments on debt of ~~$10,312, and~~$7,767, debt financing fees of ~~$1,693.~~

~~Net cash provided by financing activities was $55,123 for the nine months ended September 30, 2017. We recognized net proceeds from the issuance~~$1,661 and a change in client fund obligations of common stock of $27,820 in an underwritten public offering in June 2017, as well as incurred $45,777 of indebtedness in connection with the 2017 acquisitions. This was offset by payments on notes payable of $8,098 and debt financing fees of $1,433. In connection with the 2017 public offering, we issued 2,185,000 shares of common stock, including 285,000 shares of common stock pursuant to the exercise of the underwriters' over-allotment option, at the public offering price of $13.50 per share.

$18,497.

Sources of Liquidity. As of ~~September~~June 30, ~~2018,~~2019, Asure’s principal sources of liquidity consisted of ~~$19,194~~approximately $14,656 of cash and cash equivalents, cash ~~we expect to generate in the future~~generated from operations of our business ~~operations,~~over the next twelve months, and ~~$5,000~~$1,000 available for borrowing under our ~~revolving line of credit and $25,000 delayed draw term loan commitment with~~ Wells ~~Fargo. We~~Fargo revolver. Based on current internal projections, we believe that we have and/or will generate sufficient cash for our operational needs, including any required debt payments, for at least the next twelve months. ~~However, we~~We continue to be focused on growing our existing software operations and seeking accretive and complimentary strategic acquisitions as part of our growth strategy. We believe the available sources of liquidity described above will be sufficient to fund such growth activities but may ~~need to~~ raise additional capital or incur additional indebtedness to ~~grow~~supplement those sources as we execute on our ~~existing business operations and to seek additional strategic acquisitions in the near future.~~

~~Table of Contents~~

Our management team is focused on growing our existing software operations and is seeking additional strategic acquisitions for the near future. At present, we plan to fund any future acquisition with equity, existing cash and cash equivalents, cash we expect to generate in the future from our business operations, funds under credit facilities, and cash generated from the issuance of equity or debt securities.

We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced.growth plan. We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the ~~near~~ future. However, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all. ~~Subject~~Further, we expect to ~~the foregoing, management believes that we have sufficient capital and liquidity~~continue to ~~fund and cultivate the growth of our current and future operations for at least the next twelve months and to maintain~~be in compliance with the terms of our debt agreements and related covenants ~~or to obtain compliance through debt repayments made with our available cash on hand or anticipated for receipt in~~over the ~~ordinary course of operations.~~

next twelve months.

Capital Resources. At ~~September~~June 30, ~~2018,~~2019, we had ~~$104,476~~$111,648 outstanding under our Second Restated Credit Agreement with Wells Fargo and ~~our Syndicate Partner.~~Goldman Sachs. Under the line of credit at ~~September~~June 30, ~~2018,~~2019, we have available funds of ~~$5,000,~~$1,000, as well as ~~$25,000~~$17,000 on a delayed draw term loan. For further discussion regarding our Second Restated Credit Agreement, see Note 6 to the accompanying condensed consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

As of ~~September~~June 30, ~~2018,~~2019, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

COMMITMENTS AND CONTINGENCIES

None.

CRITICAL ACCOUNTING POLICIES

~~During the three months ended March 31, 2018, we adopted ASC Topic 606. Refer to~~

Information regarding recent accounting pronouncements is provided in Note 2, ~~in Item 1 of this Form 10-Q for disclosure of~~Significant Accounting Policies, to the ~~changes related to this adoption. There have been no additional material changes to our critical accounting policies as discussed in our 2017 Annual Report on Form 10-K.~~

Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our exposure from market risks from those disclosed in our ~~2017~~2018 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us. Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of as of ~~September~~June 30, ~~2018~~2019 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Change in Internal Controls over Financial Reporting

During the period ended ~~September~~June 30, ~~2018,~~2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on March ~~16, 2018,~~19, 2019, and investors are encouraged to review such risk factors prior to making an investment in the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 2, 2018, we issued 225,089 shares of our common stock in connection with our acquisition of USA Payrolls Inc. The issuance and sale of such shares of common stock were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

~~ITEM~~ ~~5. OTHER INFORMATION~~

~~Amendments to Bylaws~~

On November 8, 2018, our board of directors approved the amendment and restatement of our Bylaws. The amendments contained in the Bylaws delete (i) the requirement that the Chair of each board committee have a maximum term of 5 years and (ii) the requirement that, in order to be eligible for election as Chair of a board committee, candidates must have served on the board committee prior to the election.

The foregoing description of the amendments is qualified in its entirety by reference to the complete text of the Third Amended and Restated By-Laws, a copy of which is attached as Exhibit 3.1 and incorporated herein by reference.

~~Election of Director~~

On November 8, 2018, our board of directors elected Bradford S. Oberwager to serve as a director until the next annual meeting of stockholders or until his successor is duly elected and qualified, effective immediately. Mr. Oberwager will serve as Chair of our audit committee and serve as a member of our compensation committee and governance and nominating committee.

Mr. Oberwager does not have any family relationships with any of our executive officers or directors. There are no arrangements or understandings between Mr. Oberwager and any other person pursuant to which Mr. Oberwager was elected as a director. There are no related party transactions between Mr. Oberwager and our company.

Upon his election as a director, Mr. Oberwager was granted 4,000 restricted stock units and options to purchase 10,000 shares of our common stock. The restricted stock units vest in two equal installments of 2,000 restricted stock units: one on November 8, 2018 and the other on March 31, 2019. All of the options awarded to Mr. Oberwager vest in one installment on March 31, 2019. In addition, as a non-employee director, Mr. Oberwager will participate in our standard non-equity compensation plan for non-employee directors, under which he will be eligible to receive a base compensation of $22,500 per year, plus applicable committee and attendance fees, for his service as a director. Mr. Oberwager will also be eligible to receive stock options or other equity awards as a non-employee director, as approved by our board upon the recommendation of the compensation committee.

~~Table of Contents~~

In addition, in connection with his election to our board, Mr. Oberwager will enter into our standard form of indemnification agreement, a copy of which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on December 21, 2017.

~~Director Resignation~~

On November 8, 2018, Matt Behrent resigned as a member of our board and all board committees for personal reasons, effective as of the effectiveness of Mr. Oberwager’s election to our board. Mr. Behrent’s resignation was not due to any disagreement with us on any matter relating to our operations, policies or practices.

ITEM 6. EXHIBITS

~~EXHIBIT NUMBER~~		~~DESCRIPTION~~
~~3.1~~
EXHIBIT NUMBER	~~Third Amendment and Restated Bylaws.~~DESCRIPTION
31.1*
~~31.1~~	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~ 31.2*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~ 32.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~ 32.2*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~ 101*	The following materials from Asure Software, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2018,~~2019, formatted in XBRL (Extensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Comprehensive Loss, (3) the Condensed Consolidated Statements of Changes in Stockholders' Equity, (4) the Condensed Consolidated Statements of Cash Flows, and ~~(4)~~(5) Notes to Condensed Consolidated Financial Statements.

29* Filed herewith

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ASURE SOFTWARE, INC.


~~November 9, 2018~~ August 8, 2019	By:	/s/ PATRICK GOEPEL
		Patrick Goepel
		Chief Executive Officer

~~November 9, 2018~~ August 8, 2019	By:	/s/ KELYN BRANNON
		Kelyn Brannon
		Chief Financial Officer

EXHIBIT 31.1

CERTIFICATION OF PERIODIC REPORT

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, the undersigned, Patrick Goepel, certify, that:

1. I have reviewed this quarterly report on Form 10-Q of the Company (the “Report”);

2. Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in the Report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within these entities, particularly during the period in which the Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and

(d) Disclosed in the Report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the quarter ended June 30, 2019) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the Audit Committee of the Board of Directors:

(a) All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.



Date: August 8, 2019	By:	/s/ PATRICK GOEPEL
		Patrick Goepel
		Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF PERIODIC REPORT

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, the undersigned, Kelyn Brannon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Company (the “Report”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.



Date: August 8, 2019	By:	/s/ KELYN BRANNON
		Kelyn Brannon
		Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION OF PERIODIC REPORT

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, the undersigned, Patrick Goepel, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The quarterly report on Form 10-Q of the Company for the period ended June 30, 2019 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 8, 2019	By:	/s/ PATRICK GOEPEL
		Patrick Goepel
		Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Asure Software, Inc. and will be retained by Asure Software, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

EXHIBIT 32.2

CERTIFICATION OF PERIODIC REPORT

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, the undersigned, Kelyn Brannon, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: August 8, 2019	By:	/s/ KELYN BRANNON
		Kelyn Brannon
		Chief Financial Officer

	September 30, 2018 (unaudited)			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	19,194		$	27,792
Accounts receivable, net of allowance for doubtful accounts of $706 and $425 at September 30, 2018 and December 31, 2017, respectively		18,824			13,361
Inventory		1,265			509
Prepaid expenses and other current assets		4,518			2,588
Total current assets before funds held for clients		43,801			44,250
Funds held for clients		71,176			42,328
Total current assets		114,977			86,578
Property and equipment, net		7,830			5,217
Goodwill		107,557			77,348
Intangible assets, net		75,823			33,554
Other assets		3,453			614
Total assets	$	309,640		$	203,311
Liabilities and stockholders’ equity
Current liabilities:
Current portion of notes payable	$	4,502		$	8,895
Accounts payable		4,025			1,912
Accrued compensation and benefits		2,551			2,477
Other accrued liabilities		2,246			862
Deferred revenue		12,110			13,078
Total current liabilities before client fund obligations		25,434			27,224
Client fund obligations		71,699			42,328
Total current liabilities		97,133			69,552
Long-term liabilities:
Deferred revenue		998			1,125
Deferred tax liability		2,198			1,070
Notes payable, net of current portion and debt issuance cost		108,566			66,973
Other liabilities		953			817
Total long-term liabilities		112,715			69,985
Total liabilities		209,848			139,537
Commitments
Stockholders’ equity:
Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding		-			-
Common stock, $.01 par value; 22,000 shares authorized; 15,609 and 12,876 shares issued, 15,224 and 12,492 shares outstanding at September 30, 2018 and December 31, 2017, respectively		156			129
Treasury stock at cost, 384 shares at September 30, 2018 and December 31, 2017		(5,017	)		(5,017	)
Additional paid-in capital		390,834			346,322
Accumulated deficit		(285,372	)		(277,597	)
Accumulated other comprehensive loss		(809	)		(63	)
Total stockholders’ equity		99,792			63,774
Total liabilities and stockholders’ equity	$	309,640		$	203,311

	FOR THE THREE MONTHS ENDED September 30,						FOR THE NINE MONTHS ENDED September 30,
	2018			2017			2018			2017
Revenue:
Cloud	$	18,390		$	11,062		$	51,149		$	27,724
Hardware		1,457			1,003			3,612			3,651
Maintenance and support		1,264			1,777			3,985			4,325
Professional services		2,347			1,685			5,783			3,434
Total revenue		23,458			15,527			64,529			39,134

Cost of sales		8,471			3,396			21,248			8,660
Gross profit		14,987			12,131			43,281			30,474

Operating expenses
Selling, general and administrative		11,052			9,459			33,394			25,286
Research and development		3,514			883			6,495			2,488
Amortization of intangible assets		2,447			1,341			6,038			3,230
Total operating expenses		17,013			11,683			45,927			31,004

Income (Loss) from operations		(2,026	)		448			(2,646	)		(530	)

Other income (loss)
Interest expense, net		(2,350	)		(1,644	)		(6,832	)		(3,279	)
Other income		489			-			489			-
Total other loss, net		(1,861	)		(1,644	)		(6,343	)		(3,279	)

Income (loss) from operations before income taxes		(3,887	)		(1,196	)		(8,989	)		(3,809	)
Income tax provision		303			(85	)		(288	)		(368	)
Net income (loss)	$	(3,584	)	$	(1,281	)	$	(9,277	)	$	(4,177	)
Other comprehensive income (loss)
Foreign currency gain (loss)		(211	)		(6	)		(645	)		(63	)
Unrealized net losses		(101	)		-			(101	)		-
Comprehensive income (loss)	$	(3,896	)		(1,287	)	$	(10,023	)	$	(4,240	)

Basic and diluted net income (loss) per share
Basic	$	(0.24	)	$	(0.10	)	$	(0.68	)	$	(0.40	)
Diluted	$	(0.24	)	$	(0.10	)	$	(0.68	)	$	(0.40	)
Weighted average basic and diluted shares
Basic		15,223,000			12,418,000			13,591,000			10,355,000
Diluted		15,223,000			12,418,000			13,591,000			10,355,000

	September 30, 2018			Balance Using Previous Standard			Increase (Decrease)
Balance Sheet
Assets
Prepaid expenses and other current assets	$	4,518		$	4,356		$	(162	)
Total current assets before funds held for clients		43,801			43,639			(162	)
Total current assets		114,977			114,815			(162	)
Other assets		3,453			713			2,740
Total assets	$	309,640		$	306,738		$	2,578

Liabilities and stockholders’ equity
Accumulated deficit		(285,372	)		(282,470	)		2,578
Total stockholders’ equity		99,792			96,890			2,578
Total liabilities and stockholders’ equity	$	309,640		$	306,738		$	2,578

			Fair Value Measure at September 30, 2018
	Total		Quoted		Significant
	Carrying		Prices		Other		Significant
	Value at		in Active		Observable		Unobservable
	September 30,		Market		Inputs		Inputs
Description	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	19,194	$	19,194	$	-	$	-
Short-term available-for-sale securities- Funds Held for Clients		4,217		-		4,217		-
Total	$	23,411	$	19,194	$	4,217	$	-

Assets Acquired	Pay Systems		USA Payroll		Others		Total
Cash & cash equivalents	$	767	$	470	$	600	$	1,837
Accounts receivable		54		114		2,609		2,777
Fixed assets		121		94		39		254
Inventory		-		-		657		657
Other assets		49		13		1,014		1,076
Funds held for clients		10,976		20,439		14,050		45,465
Goodwill		8,871		12,388		10,373		31,632
Intangibles		7,240		14,280		15,440		36,960
Total assets acquired	$	28,078	$	47,798	$	44,782	$	120,658

Liabilities assumed
Accounts payable		113		39		1,170		1,322
Accrued other liabilities		951		393		2,983		4,327
Deferred revenue		-		-		355		355
Client fund obligations		11,820		20,439		14,050		46,309
Total liabilities assumed		12,884		20,871		18,558		52,313

Net assets acquired	$	15,194	$	26,927	$	26,224	$	68,345

	Fair Value
Cash	$	10,000
Promissory note		450
Debt discount		(46	)
Total	$	10,404

Fair value of asset acquired, Customer Relationships	$	10,404

Balance at December 31, 2017	$	77,348
Goodwill recognized upon acquisitions		31,632
Adjustments to Goodwill associated with acquisitions		(1,490	)
Foreign exchange adjustment to goodwill		67
Balance at September 30, 2018	$	107,557

			September 30, 2018
Intangible Assets	Weighted Average Amortization Period (in Years)		Gross		Accumulated Amortization			Net

Developed Technology		6.0	$	14,849	$	(6,513	)	$	8,336
Customer Relationships		7.4		81,030		(18,252	)		62,778
Reseller Relationships		7.0		853		(853	)		-
Trade Names		9.9		5,199		(1,142	)		4,057
Noncompete		5.1		1,022		(370	)		652
		7.3	$	102,953	$	(27,130	)	$	75,823

Calendar Years
2018 (October to December)	$	2,838
2019		10,835
2020		9,999
2021		9,533
2022		9,207
2023		8,009
Thereafter		24,417
Total	$	74,838
Developed Technology not yet in service		985
Net Intangible Assets	$	75,823

Notes Payable	Maturity	Stated Interest Rate			Balance as of September 30, 2018		Balance as of December 31, 2017
Subordinated Notes Payable- acquisitions	10/1/2019 – 5/25/2022		2.00% - 3.50	%		12,164		9,847
Term Loan – Wells Fargo Syndicate Partner	5/25/2022		10.55	%		52,238		34,125
Term Loan - Wells Fargo	5/25/2022		5.55	%		52,238		34,125
Total Notes Payable					$	116,640	$	78,097
Short-term notes payable					$	5,374	$	8,895
Long-term notes payable					$	111,266	$	69,202

Notes Payable	Gross Notes Payable at September 30, 2018		Debt Issuance Costs and Debt Discount			Net Notes Payable at September 30, 2018
Notes payable, current portion	$	5,374	$	(872	)	$	4,502
Notes payable, net of current portion		111,266		(2,700	)		108,566
Total Notes Payable	$	116,640	$	(3,572	)	$	113,068

Notes Payable	Gross Notes Payable at December 31, 2017		Debt Issuance Costs and Debt Discount			Net Notes Payable at December 31, 2017
Notes payable, current portion	$	8,895	$	-		$	8,895
Notes payable, net of current portion		69,202		(2,229	)		66,973
Total Notes Payable	$	78,097	$	(2,229	)	$	75,868

Year Ended	Gross Amount
December 31, 2018 (October to December)	$	633
December 31, 2019		6,026
December 31, 2020		5,197
December 31, 2021		8,151
December 31, 2022		96,633
Gross Notes Payable	$	116,640



Year Ended	Gross Amount
December 31, 2019 (July to December)	$	1,317
December 31, 2020	5,232
December 31, 2021	10,081
December 31, 2022	103,737
Gross Notes Payable	$	120,367

	Foreign Currency Items			Accumulated Other Comprehensive Loss Items
Beginning balance, December 31, 2017	$	(63	)	$	(63	)
Other comprehensive loss before reclassifications		(746	)		(746	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			—
Net current-period other comprehensive loss		(746	)		(746	)
Ending balance, September 30, 2018	$	(809	)	$	(809	)

	Three Months Ended September 30, 2018
	Before Tax			Tax Benefit		Net of Tax
Foreign currency translation adjustments	$	(211	)	$	—	$	(211	)
Unrealized net losses		(101	)				(101	)
Other comprehensive loss	$	(312	)	$	—	$	(312	)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	(3,584	)	$	(1,281	)	$	(9,277	)	$	(4,177	)

Weighted-average shares of common stock outstanding		15,223,000			12,418,000			13,591,000			10,355,000
Dilutive effect of employee stock options		-			-			-			-
Weighted average shares for diluted net income (loss) per share		15,223,000			12,418,000			13,591,000			10,355,000
Basic net income (loss) per share	$	(0.24	)	$	(0.10	)	$	(0.68	)	$	(0.40	)
Diluted net income (loss) per share	$	(0.24	)	$	(0.10	)	$	(0.68	)	$	(0.40	)

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,						FOR THE NINE MONTHS ENDED SEPTEMBER 30,
	2018			2017			2018			2017
Revenue		100	%		100	%		100	%		100	%
Gross margin		63.9			78.1			67.1			77.9
Selling, general and administrative		47.1			60.9			51.8			64.6
Research and development		15.0			5.7			10.1			6.4
Amortization of intangible assets		10.4			8.6			9.4			8.3
Total operating expenses		72.5			75.2			71.2			79.2
Other loss, net		(7.9	)		(10.6	)		(9.8	)		(8.4	)
Net income (loss)		(15.3	)		(8.3	)		(14.4	)		(10.7	)

	FOR THE THREE MONTHS ENDED SEPTEMBER 30,				Increase
Revenue	2018		2017		(Decrease)			%
Cloud	$	18,390	$	11,062	$	7,328			66.2
Hardware		1,457		1,003		454			45.3
Maintenance and support		1,264		1,777		(513	)		(28.9	)
Professional services		2,347		1,685		662			39.3
Total revenue	$	23,458	$	15,527	$	7,931			51.1

	September 30,		December 31,
	2018		2017
Working capital	$	17,844	$	17,026
Cash and cash equivalents		19,194		27,792

	For the Nine Months Ended
	September 30,
	2018			2017
Net Cash used in operating activities	$	(6,062	)	$	(2,083	)
Net Cash used in investing activities		(53,788	)		(38,351	)
Net Cash provided by financing activities		51,380			55,123